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September 10, 2020

This document is an English translation of a statement written initially in Japanese.

The Japanese original should be considered as the primary version.

Company name: FamilyMart Co., Ltd.

Representative: Takashi Sawada, Representative

Director and President

(Securities Code: 8028, TSE 1st

Sec.)

Announcement of Holding of an Extraordinary Shareholders Meeting Regarding the Share

Consolidation. Abolishment of Provisions on Share Unit Numbers, and Partial Amendment to

the Articles of Incorporation

FamilyMart Co., Ltd. (the “Company”) announced that it plans to hold an extraordinary

shareholders meeting in late October with September 10, 2020 as the record date (the

“Extraordinary Shareholders Meeting”) in the “Announcement Regarding Setting of Record

Date for Convening Extraordinary General Meeting of Shareholders” dated August 25, 2020.

With respect to the Extraordinary Shareholders Meeting, the Company passed a resolution at the

board of directors meeting held today to convene the Extraordinary Shareholders Meeting whose

agenda items include conducting a share consolidation, abolishing provisions on share unit numbers,

and partially amending the articles of incorporation, so the Company hereby announces the following.

Further, the common shares of the Company (the “Company Shares”) will become subject to the

delisting criteria established by the Tokyo Stock Exchange Inc. (the “Tokyo Stock Exchange”) in the

process of the above procedures, and it is expected that after the Company Shares have been

designated as a stock to be delisted during the period from October 22, 2020 until November 11, 2020,

they will be delisted on November 12, 2020. Please be aware that it will not be possible to trade the

Company Shares on the First Section of the Tokyo Stock Exchange (the “TSE First Section”) after

the delisting.

1. Time and Location of the Extraordinary Shareholders Meeting

(1) Meeting time and date: 10 am, October 22, 2020 (Thursday)

(2) Meeting location: Company Meeting Room, 9th floor, msb Tamachi, Tamachi Station

Tower S

1-21 Shibaura 3-chome, Minato-ku, Tokyo

2. Agenda Items of the Extraordinary Shareholders Meeting

Matters for resolution

First proposal: Share consolidation

Second proposal: Partial amendment to the articles of incorporation

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3. Share Consolidation

(1) Purpose and Grounds for the Share Consolidation

As announced in the “Announcement Regarding a Request by a Shareholder to Convene

an Extraordinary General Meeting of Shareholders” announced by the Company on

August 25, 2020 (including the contents modified by press releases announced by the

Company after that date), in order to ensure that ITOCHU Corporation (“ITOCHU”) and

Retail Investment Company, LLC (the “Tender Offeror”) become the only shareholders of

the Company, ITOCHU requested on that date the convocation of an extraordinary

shareholders meeting whose agenda items include a consolidation of shares under Article

180 of the Companies Act (Act No. 86 of 2005, as revised, hereinafter the same) with

respect to the Company Shares (the “Share Consolidation”) and an amendment to the

articles of incorporation to abolish provisions on unit share numbers subject to the

effectuation of the Share Consolidation (the “Request”).

Each proposal at the Extraordinary Shareholders Meeting has been made in the Request

made by ITOCHU, and the purpose and grounds for the Share Consolidation are as set out

in the original of the document regarding the Request (including matters revised by

ITOCHU) submitted by ITOCHU, excluding formal adjustments.

(a) Overview and Results of the Tender Offer

As announced in the “Announcement in Relation to Results of Tender Offer for

Shares in FamilyMart Co., Ltd. (Securities Code: 8028)” announced by ITOCHU and

the Tender Offeror on August 25, 2020 (including matters that have been revised by

the Announcement of Revisions to the “(Amendments) Announcement in Relation to

Results of Tender Offer for Shares in FamilyMart Co., Ltd. (Securities Code 8028)”

announced by ITOCHU and the Tender Offeror on August 27, 2020, the “Tender

Offer Results Press Release”), the Tender Offeror conducted a tender offer under the

Financial Instruments and Exchange Act (Act No. 25 of 1948, as revised) for the

common shares of FamilyMart Co., Ltd. (TSE First Section, Securities Code 8028, in

this Section 3 (Share Consolidation), the “Company,” and those common shares, the

“Company Shares”) where the tender offer period was from July 9, 2020 to August

24, 2020, the tender offer price per share (the “Tender Offer Price”) was 2,300 yen,

and the minimum number of shares to be purchased was 50,114,060 shares

(Ownership ratio (note): 9.90%) for the purpose of taking the Company private (the

“Tender Offer”), and the Tender Offer was successfully completed on August 24,

2020. As a result of the Tender Offer, ITOCHU and the Tender Offeror came to own a

total of 332,568,668 shares of the Company Shares (Ownership ratio (note): 65.71%)

as of August 28, 2020.

(Note) “Ownership ratio” means the ratio (rounded to two decimal places) relative

to the number of shares (506,108,072 shares) obtained by deducting the

number of treasury shares held by the Company as of February 29, 2020

(741,180 shares) from the total number of issued shares of the Company as

of February 29, 2020 set out in the 39th Annual Securities Report filed by

the Company on May 29, 2020 (506,849,252 shares).

(b) Circumstances Leading to the Proposals Related to Taking the Company Private

The Tender Offeror is a Godo Kaisha (limited liability company) established on

March 18, 2020 primarily for the purpose of acquiring and holding the share

certificates, etc. of the Company through the Tender Offer and, ITOCHU and Tokyo

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Century respectively hold a 99% stake and 1% stake in the Tender Offeror

As stated in the “Announcement in Relation to Commencement of Tender Offer for

Shares in FamilyMart Co., Ltd. (Securities Code 8028)” announced by ITOCHU and

the Tender Offeror on July 8, 2020 (including amendments in the “(Amendments)

Announcement Relating to Amendments to “Announcement in Relation to

Commencement of Tender Offer for Shares in FamilyMart Co., Ltd. (Securities Code

8028)”) (the “Announcement in Relation to Commencement of Tender Offer”),

ITOCHU made the Company its consolidated subsidiary by the tender offer for the

Company Shares which ITOCHU Retail Investment, LLC, which is a wholly-owned

subsidiary of ITOCHU, (“IRI,”) conducted in August 2018. After making the

Company its consolidated subsidiary, ITOCHU continued to maintain the listing of

the Company Shares, thereby enabling it to continue enjoying the advantages of a

listed company, such as maintaining the status of the Company in the industry and its

commercial rights as a neutral party, as well as securing efficient personnel. In the

meantime, ITOCHU has been making efforts toward actualizing the business synergy

of the ITOCHU Group and the Company by actively providing human resources

support from ITOCHU and the supply chain function held by the ITOCHU Group, so

that the Company is able to respond to diversified consumer needs, survive in the

fiercely competitive retail industry, and achieve sustainable growth.

On the other hand, given the circumstances in which ITOCHU and the Company

operate businesses independently as listed companies, even though the Company and

the other ITOCHU Group companies (excluding the Company) expect to mutually

complement one another’s management resources and know-how more closely and to

make the best use of them, careful consideration regarding the effectiveness and

objective fairness of the transaction is required, taking into account the protection of

minority shareholders of the Company. Due to this reason, certain limitations exist,

such as the inadequate sharing of information such as cost structures or the lack of

reallocation of personnel and physical resources between the two parties. Therefore,

we are aware that under the current circumstances, the ITOCHU Group is not able to

fully engage in prompt decision-making as one whole group.

For example, ITOCHU realizes that while the percentage of the supply chain that

includes the logistics and manufacturing sectors makes up a significantly large portion

of the cost structure of the Company’s business, the logistics costs are increasing, and

remaining high, due to upward pressures, such as an increase in labor costs resulting

from the recent lack of drivers and the expansion of e-commerce demand and

ITOCHU has made progress in a joint effort, together with NIPPON ACCESS, INC.

(“NIPPON ACCESS”), which is a wholly-owned subsidiary of ITOCHU, to reduce

logistics costs by improving logistics efficiency. Through that process, ITOCHU has

come to understand that to essentially reduce the Company’s logistics costs, it is

necessary to realize the removal of unnecessary factors and the optimization of the

supply chain as a whole at each logistical stage, from procurement of materials,

manufacturing, and inventory, to delivery to stores, and that in order to do so, it is

essential to acquire a shift schedule for the staff and delivery vehicles for each

logistics and manufacturing company, as well as inventory information. However, in

the current situation where the Company is a listed company, there is tension between

“partial optimization” as a listed company and “overall optimization” of the ITOCHU

Group which includes the Company; ITOCHU and NIPPON ACCESS are restricted

in their ability to acquire sufficient information regarding the logistics costs, etc., from

the Company. Simultaneously, from the point of view of achieving overall

optimization of the ITOCHU Group based on the ITOCHU Group’s capital costs, it

may be pointed out that measures such as the execution of business portfolio strategies

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as the ITOCHU Group or reallocation of management resources may cause some of

the profits obtained through such measures to flow outside the ITOCHU Group, and it

is difficult to maximize the corporate value of the ITOCHU Group by realizing

prompt and efficient group management. As a result, ITOCHU believes that an effort

to streamline the Company’s logistics and thereby reduce logistics costs has not yet

reached the stage where it is possible to provide adequate results.

From the time ITOCHU made the Company a consolidated subsidiary until today, the

environment surrounding the domestic convenience store industry has been changing,

as stated in I and II below. Also, according to the Japan Franchise Association, the

number of convenience stores in Japan decreased by 123 as of the end of December

2019, compared with the number at the end of the previous year. The number of stores

decreased as of the end of the year for the first time, since 2005, when the data

became comparable. According to store sales for the companies ranked first to third

for sales in the convenience store industry, the average daily turnover (for one store,

sales per day) for all stores in the fiscal year ended 2012 was 669,000 yen for Seven-

Eleven, 531,000 yen for FamilyMart, and 547,000 yen for Lawson; however, in the

fiscal year ended 2019, it decreased to 656,000 yen, 530,000 yen, and 531,000 yen,

respectively. In addition, the total net increase in number of stores for the companies

ranked first to third for sales in the convenience store industry in the term ended in

February 2020 was 45 stores, compared with the previous term, which was the worst

since recording began in February 1980. The industry is facing a harsh situation.

Although an increase in the total number of stores and an increase in the daily

turnover (for one convenience store, sales per day) of converted stores of the

Company converting were achieved to a certain extent, which was expected as an

effect of the brand integration with Circle K Sunkus, it has been determined that in

order to survive in the retail industry, which is becoming harsher, it is necessary to

slim down the organization and improve operational effectiveness in advance, and to

increase the competitiveness of the whole supply chain, and in November 2019 it was

decided that the Company would solicit early voluntary retirement to the extent that it

would not interrupt the organization’s management. At the end of the term ended in

February 2020, 1,025 employees of the Company, approximately 7% of all employees,

decided to retire early.

I. Business models for convenience store business must be reconsidered

Until now, the convenience store industry, including the Company, has continued to

grow by opening new stores and expanding services, and has been praised as a

winner in the domestic retail industry. However, in recent years, the types of

contracts with member stores have diversified in order to maintain the number of

stores, and the expanded services have resulted in more complex store operations.

While this made convenience stores more convenient, making them an

indispensable part of the infrastructure of daily life, it created more fierce

competition across the chain and a relatively higher burden on member stores. This

situation, combined with prolonged deflation and serious labor shortages caused

today’s various management issues in convenience stores, such as 24-hour operation

issues, food loss and waste issues, and the lack of enrollment in social insurance of

employees working at the member stores, which are social issues that are attracting

attention even beyond this industry. Accordingly, the convenience store business is

in a situation where the business model itself must be reconsidered

Furthermore, due to the COVID-19 outbreak, which broke out in Wuhan, Hubei

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Province in China in January 2020, and then spread all over the world including

Japan, the end of which still seems to be nowhere in sight in ITOCHU’s view,

changes have occurred in consumer behavior with respect to their lifestyle and

purchases, and those changes are not expected to completely return to their original

patterns of behavior, even after the effect of the spread of the COVID-19 outbreak

has ended, and this new behavior is expected to become normal to a certain extent.

Specifically, this includes such things as the establishment of telework, customer

service in a non-contact manner, and distinguishing the usage of purchase channels

by purposes. These changes in actions will also require a significant change in the

premises of the convenience store business, such as store locations, payment

methods, and product range

II. Rapid expansion of the e-commerce market is eating into the business territory

In the meantime, the e-commerce market is steadily expanding, and becoming more

convenient by continually providing new services. In 2019, with the government’s

recommendation to introduce cashless payments timed to coincide with the increase

in consumption tax, various business entities started mobile payment services, and

PayPay and LINE Pay, which are mobile payment services, have run campaigns,

spending promotional costs ranging from 10 to 30 billion yen, as announced on the

websites of Yahoo Japan Corporation and LINE Corporation, respectively, to lock

users into their ecosystems. ITOCHU acknowledges that as indicated by the

example of PayPay and LINE Pay, the competition in the retail industry, including

the convenience store industry, now extends beyond the boundaries of physical and

digital spaces, and has become such a cutthroat fight in which survival will be

difficult unless an investment equivalent to net income attributable to owners of the

Company’s parent (“Consolidated Net Income”) (for the term ended in February

2020, 43.5 billion yen) is made. In addition, overseas digital platforms, a

representative example being Amazon.com, Inc., are forming capital and business

alliance with physical stores such as supermarkets on a continual basis, generously

injecting management resources into marketing strategies formulated based on a

wide variety of partners and customer data acquired by e-commerce (for example,

according to the material disclosed by Amazon, for the number of customers, there

are over 100 million Amazon Prime members worldwide as of April 2018, and

according to research by Consumer Intelligence Research Partners, LLC, it is

estimated that the number of Amazon Prime members in the U.S. is approximately

112 million, as of the end of December 2019), and eating into the business territory

of the Company. Furthermore, these network influences, called platformers, are

persuading consumers who visit the company’s platform to do so-called “shopping

on the sidelines” by giving a pinpoint purchasing recommendation to those

consumers, which is conducting “targeted advertising” based on the consumer’s past

viewing history or purchase history. By utilizing the platforms of network influences,

consumers are able to compare the prices of favored products on the Internet, or

purchase products that could be bought only in distant places, without visiting

physical stores. ITOCHU recognizes that the efforts of these network influences,

called platformers, are leading to a rapid expansion of e-commerce, together with the

diversification of consumer preferences, as a result of factors such as the fact that

first digital generation, known as the “millennials,” who were born between 1980 to

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2000, have become the main consumers.

As stated above, in a business environment with diversified consumer preferences and

purchase channels and changes in the face-to-face sales industry taking place at an

unprecedented speed, ITOCHU believed that conventional “product-oriented”

businesses that products are planned, developed, and provided on a company-led basis,

and developing products utilizing the company’s strength and technology, based on

the idea that “good products should sell” and vertically-segmented organizations are

not sufficient to address the situation appropriately. Based on this view, ITOCHU

newly established “The 8th Company” in July 2019, and has been transforming its

business into a new business from a market-oriented perspective to meet market and

consumer needs, fully leveraging various business platforms of ITOCHU, which has

strengths in the consumer sector. To be specific, ITOCHU formed a business alliance

related to the inbound tourism business targeting affluent Chinese visitors to Japan,

and invested in “Couger Inc.,” which engages in human-like AI agents mobilizing the

world’s premier technology related to game AI (containing members who were

involved in the development of top games such as Final Fantasy and Magimon),

blockchain (chosen among the world’s top 10 in the “Ethereum” world competition,

for the first time as a Japanese team), and image recognizing AI (ranked third in the

world at an image-recognition competition organized by Facebook). However,

ITOCHU believes this is not speedy enough to drastically transform the conventional

“product oriented” trading company business.

On the other hand, according to the Company, while the business model of the retail

industry to which the Company belongs has been changing to one that tries to enhance

the quality of the business in a limited market, and companies are required to adapt to

changes in drastic and speedy ways, the Company has believed that with respect to the

area of management division, the digital area, and overseas expansion, in addition to

the existing business areas of the Company, the use of diversified management

resources including cooperation with third party companies other than the Company

Group including the ITOCHU Group is the source of growth for the Company.

However, under the current circumstances in which ITOCHU and the Company

operate businesses independently as listed companies, the Company has recognized

that it is difficult for a prompt decision making. Further, there is also a recognition that

there is a possibility that optimization by redistribution of human and physical

management resources will not be achieved, as the decisions will be made with certain

restrictions on sharing information, such as the cost structure of the parties.

In addition, in light of the “Practical Guidelines for Group Governance Systems”

released by the Ministry of Economy, Trade and Industry on June 28, 2019, ITOCHU

is deliberating, at an important company-wide conference with its directors

participating, whether it is optimal to keep each listed subsidiary as a listed subsidiary,

and is committed to securing sound and fair corporate governance for the entire group.

In light of the aforementioned business environment surrounding the Company, while

making the efforts stated above, ITOCHU came to realize that in order for the

Company to remain a winner in this fierce competition and to achieve sustainable

growth, it is indispensable to not keep the Company as a listed subsidiary, but that the

management resources of the ITOCHU Group be redistributed to the Company now,

and that ITOCHU and the Company should work together to challenge themselves

aggressively to make a transformation to a new business model, in addition to

continuing the conventional business model, so as to flexibly and promptly address

the rapid change in the market environment. At the same time, ITOCHU believes that

by (a) creating a digital platform based on the store network of approximately 16,500

stores in Japan and approximately 15 million customers visiting stores per day of the

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Company, which is the largest consumer contact point platform of the ITOCHU

Group in the consumer sector, and providing new services and establishing a business

model, and also making the digital platform the place to introduce and practice the

next generation, new technology of the ITOCHU Group to further utilize that strength,

which is the consumer contact point, and (b) making an effort to optimize the supply

chain of the Company and make it more efficient, as well as bring it to the next

generation by making the best use of IT, represented by electronic settlement, through

the utilization of various business foundations of ITOCHU to the maximum extent

through “The 8th Company” created in July 2019, and thus achieving a so-called

digital transformation of the consumer sector business of the ITOCHU Group

centered on the Company would thereby further stabilize the consumer sector, which

is an area of ITOCHU’s strengths. In addition, ITOCHU has come to believe that it

would be the most optimal choice to enhance the corporate value of the entire

ITOCHU Group over the medium and long term. From the perspective of medium

and long term growth, ITOCHU believes that redistributing the management

resources of the ITOCHU Group to the Company and striving to aggressively

transform the business model of the Company would contribute to enhancing the

corporate value of the entire ITOCHU Group, including the Company, over the

medium and long term. However ITOCHU believes that in the short term, the burden

on the Company that accompanies transformation of the Company’s business model

runs the risk of largely impacting the revenue from the existing business of the

Company, and is likely to be at odds with interests of the general shareholders of the

Company.

Accordingly, ITOCHU came to believe that the following would be necessary in order

to enhance the corporate value of the entire ITOCHU Group, including the Company,

and began initial deliberations in early September 2019 to take the Company private:

(i) first, it would be necessary to ensure that the interests of the general shareholders of

the Company would not be undermined, by taking drastic measures, specifically by

taking the Company private, and by offering the general shareholders of the Company

an appropriate and reasonable opportunity to sell the Company Shares; (ii) meanwhile,

ITOCHU should organize a structure in which ITOCHU and the Company extend

beyond their current mutually independent management structures as a parent

company and a listed subsidiary, integrate in name and reality, and by promoting

mutual use of the management resources and know-how and proceeding with prompt

decision-making as the ITOCHU Group take drastic measures that could lead to

medium and long term growth of the entire ITOCHU Group, including the Company,

even if this does not directly result in short term profits for the Company, and build a

stronger alliance, such as by having the Company and the other ITOCHU Group

companies mutually complement one another’s management resources and know-

how seamlessly, and make best use of them. In early January 2020, ITOCHU retained

Nomura Securities, a financial advisor of ITOCHU, as a third-party evaluation firm

independent from the Company, and Nishimura & Asahi as a legal advisor

independent from the Company, and built a structure for discussing and negotiating to

take the Company private. In early February 2020, ITOCHU made an initial overture

to the Company to the effect that it would like to commence deliberations toward

taking the Company private. On February 17, 2020, ITOCHU submitted to the

Company an initial proposal letter concerning a series of transactions resulting in the

Company’s shareholders comprising of only all or part of ITOCHU and the Tender

Offeror (the “Transactions”).

(c) System for Deliberation at the Company

As stated in the Company’s press release on July 8, 2020, titled “Announcement of

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Opinion Pertaining to the Tender Offer of the Company’s Shares by Retail

Investment Company, LLC, a Subsidiary of ITOCHU Corporation, the Parent

Company” (including amendments in the Company’s press release on July 10,

2020, titled “(Amendments) Announcement of Opinion Pertaining to the Tender

Offer of the Company’s Shares by Retail Investment Company, LLC, a

Subsidiary of ITOCHU Corporation, the Parent Company”), in response to the

abovementioned initial proposal from ITOCHU, based on the advice of Mori

Hamada & Matsumoto as the Company’s legal advisor, the Company immediately

began to establish a system to discuss and negotiate the Transactions from the

perspective of improving the Company’s corporate value and ensuring the interests of

the Company’s general shareholders from a position independent of the Tender

Offeror. The reason for that is that the Company is a consolidated subsidiary of

ITOCHU and the Transactions constitute transactions that are typified by issues such

as the existence of structural conflicts of interest and information asymmetry, and

therefore the Company had to address those issues to ensure the fairness of the

Transactions.

Specifically, the Company established a special committee consisting of three outside

directors of the Company (Mr. Tadashi Isawa, Ms. Mika Takaoka, and Ms. Chikako

Sekine) based on a written resolution of the meeting of the board of directors of the

Company held on February 19, 2020 right after the Company received an initial

written proposal from ITOCHU on February 17, 2020. The Company then requested

the special committee to (i) deliberate on and determine (a) the propriety of the

Transactions from the perspective of whether they will contribute to the improvement

of the Company’s corporate value and (b) the appropriateness of the transaction terms

and the fairness of procedures from the perspective of ensuring the interests of the

Company’s general shareholders, and then deliberate on and provide the Company’s

board of directors with advice regarding whether the Company’s board of directors

should endorse the Tender Offer and whether it should recommend that the

Company’s shareholders tender their shares in the Tender Offer and (ii) deliberate on

and provide the Company’s board of directors with an opinion regarding whether the

decision of the Company’s board of directors on the Transactions will be

disadvantageous to the Company’s minority shareholders, and the Company

commissioned the special committee to submit its opinion regarding those matters to

the Company. Further, the special committee appointed Nakamura, Tsunoda &

Matsumoto as its legal advisor and PwC Advisory LLC (“PwC”), which is its

financial advisor and third-party appraisal firm, based on the authority described

above.

Further, the Company had the special committee confirm that there is no problem with

respect to the professional expertise and the independence from ITOCHU, the Tender

Offeror, the Company, the National Federation of Agricultural Cooperative

Associations (“Zen-Noh”), The Norinchukin Bank (“Nochu”), and Tokyo Century of

Mori Hamada & Matsumoto as the Company’s legal advisor and Merrill Lynch Japan

Securities Co., Ltd. (“Merrill Lynch Japan Securities”) as the Company’s financial

advisor and the Company received the special committee’s approval for their

appointment. (for matters such as involvements of Zen-Noh, Nochu and Tokyo

Century in the Transactions, see “(d) Discussions with Zen-Noh and Nochu and with

Tokyo Century and Management Policy After Taking the Company Private” below.)

Company received guidance and other legal advice from Mori Hamada & Matsumoto,

including guidance and advice on measures to ensure the fairness of the procedures in

the Transactions, and it also received from Merrill Lynch Japan Securities a stock

valuation report showing the results of the valuation of the Company Shares and other

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advice from a financial perspective. In light of that, the Company carefully discussed

and deliberated on the propriety of the Transactions and the appropriateness of the

transaction terms.

(d) Discussions with Zen-Noh and Nochu and with Tokyo Century and Management

Policy After Taking the Company Private

While submitting this proposal to the Company, ITOCHU was simultaneously

holding discussions concerning the scheme of the Tender Offer and the management

policy for the Company after going private with Zen-Noh, Nochu, and the Tokyo

Century, from the viewpoint that they have existing transactional relationships with

the Company as strategic partners that are necessary to promptly and steadily

actualize the business strategy for the Company after going private, and that there is a

high probability of creating synergy.

ITOCHU, Zen-Noh, and Nochu, from management’s point of view, are in a

cooperative relationship with the ITOCHU Group, such that Zen-Noh and ITOCHU

are conducting joint business in collecting and supplying grain in North America

(CGB Enterprises, Inc.) via the Food Company, and also with regard to the raw

materials for home meal replacement and prepared food for the Company, and from a

financial point of view, Nochu is one of the close correspondent financial institutions

for the ITOCHU Group. With these conventional efforts as a background, based on

the intentions of Zen-Noh and Nochu to participate in taking the Company private, by

late February 2020, ITOCHU, Zen-Noh and Nochu came to believe that Zen-Noh and

Nochu are capable of creating synergy with the Company in terms of (i) product

supply, (ii) community activation, and (iii) overseas strategy by conducting capital

participation in the Company as strategic partners.

Since February 1998, when ITOCHU made the Company an equity-method affiliate,

Tokyo Century has positioned the Company as an important business partner through

transactions involving leases of the Company stores and ancillary facilities, and has

made efforts such as expansion of transactions with the ITOCHU Group companies

and collaboration using ITOCHU’s domestic and overseas network. ITOCHU

believes that the following factors will serve an important role in various measures to

convert the Company’s business model after the Transactions are executed. First, there

are business and capital relationships between the ITOCHU Group and Tokyo Century,

and there is a collaboration, using ITOCHU Group’s domestic and overseas network,

among the ITOCHU Group and Tokyo Century. Second, Tokyo Century’s experience

and various services not previously considered of integrating the three axis of “finance

× service × business,” surpassing various business fields and finance limitations, such

as (a) the domestic lease business leasing mainly information and communication

equipment, and (b) domestic automobile business areas comprised of leasing

automobiles to corporations and individuals, and rental cars. Based on the intention of

Tokyo Century to participate in taking the Company private, in the middle of February

2020, ITOCHU and Tokyo Century commenced deliberations and discussions

regarding Tokyo Century’s capital participation in the Company. Tokyo Century aims

to make a “contribution to realize a society based on a circular economy” together

with partner companies by providing various new financial services, including but not

limited to the leasing business, and ITOCHU believes that synergies can be expected

which will create new value including cost reductions as a result of Tokyo Century

bringing various solutions such as building a system to optimally allocate ancillary

facilities for each store to the businesses required by the community, and which

maintains progress by cultivating close relationships with people and the community,

which the Company (which is essential “infrastructure” in the community) aims to

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conduct.

For the foregoing reasons, in late February 2020, ITOCHU came to believe that the

Zen-Noh, Nochu and Tokyo Century would be the appropriate strategic partners that it

needs to promptly and steadily actualize the business strategy for the Company after

taking the Company private. Zen-Noh and Nochu supply domestic perishable foods

using their suppliers, and Tokyo Century enables cost reductions by optimizing the

allocation of the Company stores’ ancillary facilities, among others. ITOCHU believes

that, through a capital tie-up, synergies will be actualized by Zen-Noh, Nochu and

Tokyo Century integrating management resources, such as personnel resources to the

Company.

In light of those examinations, it is expected that if a series of procedures have been

carried out to make ITOCHU and the Tender Offeror the only shareholders of the

Company, the Tender Offeror will transfer to Zen-Noh the Company Shares in a

number equivalent to 0.86% of the total number of the Company Shares at that time

and will transfer to Nochu the Company Shares in a number equivalent to 4.04% of

the total number of the Company Shares at that time. It is also expected that Tokyo

Century will execute a transaction to acquire the Company Shares in a number

equivalent to approximately 0.40% of the total number of the Company Shares at that

time in lieu of the equity of the Tender Offeror that Tokyo Century holds at that time.

It is expected the capital structure, etc. of the Company after those transactions have

been conducted will be as shown below.

ITOCHU has discussed the management policy for the Company after being taken

private with Zen-Noh and Nochu, and believes it is possible to create synergy with the

Company in terms of (i) product supply, (ii) community activation, and (iii) overseas

strategy, through cooperation between the ITOCHU Group, Zen-Noh, Nochu, and the

Company. At present, ITOCHU, Zen-Noh, and Nochu expect the following

approaches to create synergies: (i) sales of agricultural products directly delivered

from the farm at stores of the Company, by taking advantage of the domestic

production base owned by Zen-Noh and Nochu, and supplying raw materials for

home-meal replacement, (ii) mutual transfer of customers by combining JA service

businesses such as financial services with the Company’s in-store services, and (iii)

promotion of the export of domestic agricultural and livestock products by utilizing

the Company’s overseas store network. These approaches are considered to be

consistent with the direction of the Company, aiming to be “hyper local-based” as

advocated in policy briefings to franchisers that enter into franchise agreements with

11

the Company or on the Company’s webpage. After the Transactions, ITOCHU, Zen-

Noh, and Nochu intend to enter into an agreement regarding approaches to create

synergies with the Company after the four parties have held discussions regarding the

specific details thereof.

Furthermore, ITOCHU has discussed the management policy for the Company after

being taken private with Tokyo Century, and believes that it is possible to create

synergy with the Company in streamlining the existing transaction relationship

between Tokyo Century and the Company, and promoting the conversion of the

Company’s business model by utilizing Tokyo Century’s wide range of business areas

and various types of services creatively beyond the finance framework.

ITOCHU has been working on building up strong non-resource sectors, particularly

consumer-related sectors, and the Company’s business is a central business within

those sectors, and ITOCHU will basically respect the current management structure of

the Company. As of today, four out of the twelve directors of the Company are

originally from ITOCHU, and, in accordance with the management regulations

regarding the group management of ITOCHU, ITOCHU will support the business of

the Company as part of the ITOCHU Group, while also respecting the independent

execution of management at the Company. Although the specific management

structure of the Company after being taken private is yet to be determined, ITOCHU

will discuss and decide the structure aiming to respect the current management

structure. At present, there is no plan to dispatch officers from Zen-Noh, Nochu, and

Tokyo Century, the strategic partners, to the Company.

(e) Circumstances Leading to the Final Proposal

Following the submission of the initial written proposal on February 17, 2020,

ITOCHU and the Tender Offeror had repeated discussions and negotiations with the

Company with the aim of commencing the Tender Offer on April 13, 2020, but with

the spread of COVID-19 in Japan since around March 2020 and the fact that there

was a divergence between the views of the Company and ITOCHU and the Tender

Offeror on whether the effects of the spread of COVID-19 will have a temporary or a

medium- or long-term impact on the business of the Company, ITOCHU and the

Tender Offeror notified the Company that they would hold the commencement of the

Tender Offer that was scheduled on April 13, 2020 and that they would continue to

have discussions and consider reviewing the Tender Offer Price.

On June 10, 2020, ITOCHU and the Tender Offeror received from the Company the

presentation of a business plan that incorporated the effects of the spread of COVID-

19 and newly verified the reasonableness and feasibility of that business plan and

reflected their own forecast on figures of the business plan, and they reconsidered the

Tender Offer Price in light of advice on the valuation results from the financial advisor

and discussions based thereon. ITOCHU and the Tender Offeror also received from

the Company in the negotiation process requests to increase the Tender Offer Price

and requests regarding the terms of the purchase, and they considered those requests.

In light of those considerations, on July 2, 2020, ITOCHU made a final proposal to set

the Tender Offer Price at 2,300 yen and the lower limit on the number of shares to be

purchased at 50,114,060 shares (Ownership ratio: 9.90%), to request that the

Company’s directors convene an extraordinary shareholders meeting whose agenda

items include the Tender Offeror conducting a Share Consolidation of the Company

Shares after the completion of the Tender Offer and, subject to the effectuation of the

Share Consolidation, amending the articles of incorporation to abolish provisions on

12

share unit numbers, promptly after the settlement of the Tender Offer is completed, in

accordance with Article 297, paragraph 1 of the Companies Act, and requesting that

the Company issue a public notice to set a record date so that a date that is soon after

the commencement date of the settlement of the Tender Offer will be the record date

of the extraordinary shareholders meeting (the “Final Proposal”).

(f) Details of the Decision by the Company on the Final Proposal

After a Final Proposal, the special committee submitted the Report with contents that

are substantially as follows to the board of directors of the Company with the

unanimous agreement of its members as a result of multiple careful discussions and

deliberations about the Matters of Inquiry based on the details of the legal advice from

Nakamura, Tsunoda & Matsumoto, advice from a financial perspective from PwC,

and the PwC Stock Valuation Report submitted by PwC on July 7, 2020.

a. Contents of the Report

(i) The special committee believes it is appropriate for the board of the directors of

the Company to endorse the Tender Offer and express an opinion that the

decision on whether to tender shares in the Tender Offer should be left to the

judgment of the shareholders of the Company.

(ii) The special committee believes it would not be disadvantageous to the minority

shareholders of the Company for the board of directors of the Company to

make a decision to endorse the Tender Offer and to decide on an opinion that

the decision on whether to tender shares in the Tender Offer should be left to the

shareholders of the Company. The special committee believes it would not be

disadvantageous to the minority shareholders of the Company for the board of

directors to make a decision pertaining to taking the Company private through

the Share Consolidation after the successful completion of the Tender Offer on

the assumption that will be done following the methods expected in the

Transactions.

b. Deliberations

(i) The special committee believes the Transactions will contribute to the

improvement of the corporate value of the Company.

(ii) The special committee believes fair procedures from the perspective of ensuring

the interests of the general shareholders of the Company are being implemented

given that it is recognized that (i) an independent special committee has been

established in the Company and that special committee has functioned

effectively, (ii) the special committee and the Company have obtained

independent expert advice from external experts, (iii) each of the special

committee and the Company obtained a stock valuation report from an

independent third-party appraisal firm with expertise as a basis for their

judgments on the Transactions, (iv) the Company built a structure that excludes

directors and other people who have a special interest from discussions and

negotiations on the Transactions as much as possible and allows it to have

discussions and negotiations from a position that is independent from ITOCHU,

(v) a so-called indirect market check is being conducted in the Tender Offer,

13

(vi) it is expected it will be ensured that the general shareholders of the

Company will have a chance to make proper decisions in the Tender Offer

based on sufficient information, and (vii) practical measures are being taken that

are desirable in the Fair M&A Guidelines formulated by the Ministry of

Economy, Trade and Industry in June 2019, and coercion has been eliminated.

Further, even though a majority of minority condition has not been set in the

Tender Offer, a lower limit on the number of shares to be purchased has been

set so that the Ownership ratio of the Tender Offeror and ITOCHU will be at

least 60% if the Tender Offer is successfully completed. Although it is believed

that minimum will function as a measure to secure fairness to a certain extent in

the sense that the Tender Offer will not be successfully completed without a

considerable number of general shareholders tendering their shares, given that

reasonable grounds for the number of shares in that minimum cannot be

confirmed, it is believed it cannot be said that the setting of that minimum is

sufficient in light of the purpose of majority of minority conditions. However,

given that other sufficient measures to secure fairness in the Transactions have

been taken, even if a majority of minority has not been set, and it cannot be said

that the setting of a minimum is sufficient in light of the purpose of majority of

minority, it is believed the fairness of the procedures in the Transactions will be

prejudiced solely because of the setting of that minimum.

(iii) With respect to the appropriateness of the transaction terms of the Transactions,

based on the following points, the purchase method and the type of

consideration for the purchase in the Transactions are considered reasonable,

but although the Tender Offer Price has a certain level of reasonableness from

the perspective of providing the general investors of the Company an

opportunity to earn a return on their investments and it cannot be recognized

that the Tender Offer Price lacks validity, it is not thought the Tender Offer

Price is at a level where the Company can actively recommend that its general

shareholders should tender their shares in the Tender Offer.

(iv) As explained in (i) above, given that it is recognized that the Transactions

including the Tender Offer and the subsequent initiatives will contribute to the

improvement of the corporate value of the Company, the special committee

believes it is reasonable for the board of directors of the Company to endorse

the Tender Offer. However, as explained in ii. above, fair procedures to ensure

the interests of the general shareholders of the Company are being implemented

in the Transactions, and as explained in iii above, it is recognized that the

purchase method and the type of consideration for the purchase in the

Transactions are reasonable, and, from the perspective of providing the general

shareholders of the Company an opportunity to earn a return on their

investments, the Tender Offer Price has a certain level of reasonableness and it

cannot be recognized that the Tender Offer Price lacks validity, but given that it

cannot be recognized that the Tender Offer Price is at a level where the

Company can actively recommend that its general shareholders should tender

their shares in the Tender Offer, the board of directors of the Company cannot

recommend that the shareholders of the Company tender their shares in the

14

Tender Offer, so it is believed it is appropriate to leave the decision of whether

to tender shares in the Tender Offer to the judgement of the shareholders of the

Company.

(v) As explained in (i) above, it is recognized that the Transactions and the

subsequent initiatives will contribute to the improvement of the corporate value

of the Company, so it is believed that the decision by the board of directors of

the Company to express an opinion endorsing the Tender Offer would not be

disadvantageous to the minority shareholders of the Company. Further, as

explained in ii. above, fair procedures are being carried out to secure the

interests of the general shareholders in the Transactions, and as explained in iii.

above, with respect to the transaction terms of the Transactions, the purchase

method and the type of consideration for the purchase are considered reasonable.

While it is not believed that the Tender Offer Price is at a level where the

Company can actively recommend that its general shareholders should tender

their shares in the Tender Offer, the Tender Offer Price has a certain level of

reasonableness from the perspective of providing the general shareholders of

the Company an opportunity to earn a return on their investments, and it cannot

be recognized that the Tender Offer Price lacks validity from the perspective of

providing the general shareholders of the Company an opportunity to earn a

return on their investments, so it is believed that decision by the board of

directors of the Company to leave the decision of whether to tender shares in

the Tender Offer to the judgment of the shareholders of the Company after

disclosure of the grounds therefor instead of actively recommending that the

shareholders of the Company tender their shares in the Tender Offer would not

be disadvantageous for the minority shareholders of the Company. Further, if

the Company is made private after the successful completion of the Tender

Offer, the Tender Offeror will make a request to convene the Special

Shareholders’ Meeting where the Share Consolidation is one of agenda items. It

is expected money in an amount equivalent to the Tender Offer Price per share

would be delivered to the shareholders other than ITOCHU and the Tender

Offeror if a proposal for the Share Consolidation is approved at that Special

Shareholders’ Meeting. And if the Company receives a request to convene the

Special Shareholders’ Meeting from the Tender Offeror, it plans on convening

the Special Shareholders’ Meeting where a shareholders’ proposal for the Share

Consolidation is one of agenda items in response to that request. Hence, based

on the assumption that, among other things, taking the Company private after

the Tender Offer will be led by the Tender Offeror and the role of the Company

will be limited, it is believed that it would not be disadvantageous for the

minority shareholders of the Company for the board of directors to make a

decision pertaining to taking the Company private through the Share

Consolidation after the successful completion of the Tender Offer in the

Transactions for the reasons, among other things, that as explained in i. above, it

is believed that the Transactions and the subsequent measures will contribute to

the improvement of the corporate value of the Company, that the amount

expected to be delivered to the shareholders at the time of the Share

Consolidation would be the same as the Tender Offer Price, and therefore has a

certain level of reasonableness from the perspective of providing the general

15

shareholders of the Company an opportunity to earn a return on their

investments and cannot be recognized as an amount that lacks validity, that it

would take time and be costly to leave the convocation of the Special

Shareholders’ Meeting to a decision of a competent court, instead of the

Company to convene the Special Shareholders’ Meeting in response to a request

by the Tender Offeror, which might be against the interests of its minor

shareholders, and that it is possible for the shareholders that oppose the Share

Consolidation to make a request to the Company to purchase their shares and

file a petition with a competent court for a determination of the share price.

Further, a lower limit on the number of shares to be purchased has been set in

the Tender Offer so that the Ownership ratio of the Tender Offeror and

ITOCHU after the Tender Offer will be 60%, so the Company might not be

made private even if the Tender Offer is successfully completed. With respect to

that point, considering factors such as the attendance rates at past shareholders

meetings of the Company, even 60% is effectively nearly two-thirds of the

shareholders in attendance, so considering that the shareholders that have not

tendered their shares in the Tender Offer may exercise their voting rights to

approve the Tender Offer (for example, ITOCHU expects there are ETFs listed

on the Tokyo Stock Exchange and passive index funds other than ETFs listed

on the Tokyo Stock Exchange that will approve the agenda item of the

shareholders meeting for the Share Consolidation even if they do not tender

their shares in the Tender Offer), it is believed it is not highly likely the Share

Consolidation will not be approved and the Company will not be made private.

The special committee therefore believes that it cannot be said that the

shareholders of the Company will be put in an extremely unstable position.

In response to the Final Proposal, ITOCHU and the Tender Offeror received a reply

from the Company on July 3, 2020 stating that the Company endorsed the Tender

Offer because it believes that its corporate value will improve in the medium- and

long-term by taking the Company private through the Transaction, but it is not

recognized that a sufficient premium has been added compared to the levels of

premiums in other tender offers with a purchase size of at least 50 billion yen

conducted for the purpose of making a company private that have been announced

since 2010, although it cannot be said that the Tender Offer is at a level that lacks

validity from the perspective of providing the general shareholders of the Company an

opportunity to earn a return on their investments because it is believed a certain

premium has been added to the current market price of the Company Shares, so the

Company reached a conclusion that the Tender Offer Price is not at a level where the

Company can actively recommend that its general shareholders should tender their

shares in the Tender Offer. Therefore, the Company made a decision to take a neutral

position regarding whether to recommend that the shareholders tender their shares in

the Tender Offer, and to leave it to the discretion of the shareholders about whether to

tender their shares in the Tender Offer.

(g) Circumstances from the Commencement to the Completion of the Tender Offer

Following that, ITOCHU and the Tender Offeror decided on July 8, 2020 to

implement the Transaction, including the Tender Offer, considering the need to

immediately implement the Transaction, and the Company’s endorsement to the

significance of taking the Company private through the Transaction, and they

conducted the Tender Offer with a tender offer period from July 9, 2020 to August 24,

16

2020.

(h) Proposal Upon Completion of the Tender Offer

As a result, as explained in (a) above, the Tender Offer was successfully completed, so

the first proposal and the second proposal (the “Proposals”) were made for the

purpose of taking the Company private.

Further, if the proposal for the Share Consolidation has been approved at the

Extraordinary Shareholders Meeting, if the Share Consolidation results in fractional

shares that are less than one share, the money obtained by selling the Company Shares

equivalent to the total sum of such fractional shares (if the total sum contains

fractional shares less than one share, the fractional shares are to be rounded down;

hereinafter the same) is to be delivered to the shareholders of the Company that hold

those fractional shares in accordance with the procedures prescribed in Article 235 of

the Companies Act and other relevant laws and regulations.

With respect to the sale price of the Company Shares equivalent to the sum total of

those fractional shares, ITOCHU and the Tender Offeror will request that the

Company file a petition for permission for sale by private contract with the court so

that, as a result of the sale, the amount of money to be delivered to the Company’s

shareholders that did not tender their shares in the Tender Offer will be equal to the

amount calculated by multiplying the Tender Offer Price (2,300 yen) by the number

of the Company Shares held by those shareholders.

(2) Overview of the Share Consolidation

(a) Schedule of the Share Consolidation

Announcement of the record

date of the Extraordinary

Shareholders Meeting

August 26, 2020 (Wednesday)

Record date of the Extraordinary

Shareholders Meeting

September 10, 2020 (Thursday)

Date of the Extraordinary

Shareholders Meeting

October 22, 2020 (Thursday)

(scheduled)

Date of designation of the stock

to be delisted

October 22, 2020 (Thursday)

(scheduled)

Final trading date of the

Company Shares

November 11, 2020 (Wednesday)

(scheduled)

Delisting date of the Company

Shares

November 12, 2020 (Thursday)

(scheduled)

Effective date of the Share

Consolidation

November 16, 2020 (Monday)

(scheduled)

(b) Details of the Share Consolidation

17

a. Class of shares subject to consolidation

Common shares

b. Consolidation ratio

The Company Shares will be consolidated at a ratio of 1 share with respect to

253,043,334 shares of the Company Shares owned by the shareholders entered or

recorded in the final shareholder register of November 16, 2020 as of November

16, 2020 (scheduled).

c. Total number of issued shares to be reduced

506,086,666 shares

(Note) The Company passed a resolution at the board of directors meeting held

today to cancel 762,584 treasury shares on November 16, 2020, so the total

number of issued shares to be reduced is based on the total number of issued shares

after that cancellation.

d. Total number of issued shares before the effectuation of the Share Consolidation

506,086,668 shares

(Note) The Company passed a resolution at the board of directors meeting held

today to cancel 762,584 treasury shares on November 16, 2020, so the total

number of issued shares before the effectuation of the Share Consolidation is based

on the total number of issued shares after that cancellation.

e. Total number of issued shares after the effectuation of the Share Consolidation

2 shares

f. Total number of authorized shares on the effective date

2 shares

g. Method of processing fractional shares and amount of money expected to be

delivered to the shareholders as a result of that processing

As stated in “(1) Purpose and Grounds for the Share Consolidation”, the purpose of

the Share Consolidation is to ensure that ITOCHU and the Tender Offeror become

the only shareholders of the Company, and the number of Company Shares held by

the shareholders other than ITOCHU will become fractional shares.

If any fraction of a share arises as a result of the Share Consolidation, a number of

shares equivalent to that total (if there is a fraction of a share in that total, that will

be rounded down) will be sold and the proceeds obtained from that sale will be

delivered to each shareholder in proportion to their respective fractions. With

respect to that sale, the Company plans on selling to ITOCHU (or the Tender

Offeror) the Company Shares equivalent to the sum total of those fractions with the

permission of the court under Article 234, paragraph 2 of the Companies Act as

applied mutatis mutandis under Article 235, paragraph 2 of that Act or purchasing

the Company Shares equivalent to the total sum of those fractions with the

permission of the court under Article 235, paragraph 4 of that Act as applied

18

mutatis mutandis under Article 235, paragraph 2 of that Act.

If the permission of the court is obtained as expected, it is expected the sale price in

that case will be set at a price that will ensure delivery of money equivalent to the

amount obtained by multiplying the number of the Company Shares owned by the

shareholders by 2,300 yen, which is the same amount as the Tender Offer Price.

(3) Grounds of the Amount of Money Expected to be Delivered to the Shareholders Upon the

Processing of Fractions in Connection with the Share Consolidation

(a) Grounds and Reasons of the Amount of Money Expected to be Delivered to the

Shareholders Upon the Processing of Fractions

a. Matters to be noted to ensure the interests of the shareholders other than the parent

company, etc. are not harmed if there is a parent company, etc.

Considering that the Company is a consolidated subsidiary of ITOCHU at the time

of the commencement of the Tender Offer, the Transaction, which includes the

Tender Offer, constitutes an important transaction with a controlling shareholder,

and that ITOCHU has an inherent conflict of interest with the other shareholders of

the Company, ITOCHU and the Company have taken the measures set out below

in each of “b. Method of processing fractional shares, amount of money expected

to be delivered to the shareholders as a result of that processing, and matters

regarding the appropriateness of that amount” and “(c) Measures to Ensure the

Fairness of the Transaction and Measures to Avoid Conflicts of Interest” below,

from the perspective of ensuring fairness of the Tender Offer and avoiding conflicts

of interest. The measures that have been implemented by ITOCHU are based on

explanations given by ITOCHU.

b. Method of processing fractional shares, amount of money expected to be delivered

to the shareholders as a result of that processing, and matters regarding the

appropriateness of that amount

As set out in “g. Method of processing fractional shares and amount of money

expected to be delivered to the shareholders as a result of that processing” in in

“(b) Details of the Share Consolidation” in “(2) Overview of the Share

Consolidation” above, it is expected money equivalent to the amount obtained by

multiplying the number of the Company Shares owned by the shareholders by

2,300 yen, which is the same amount as the Tender Offer Price, will be delivered to

the shareholders.

The appropriateness of the Tender Offer Price is based on the following

explanations given by ITOCHU to the Company.

Further, the following explanations are as set out in the original of the document

regarding the Request (including matters revised by ITOCHU) submitted by

ITOCHU, excluding formal adjustments.

As set out in the Tender Offer Statement dated July 9, 2020 (including matters

revised in the Amendments to the Tender Offer Statement dated July 21, 2020 and

July 29, 2020, hereinafter the same), the Tender Offer Price was determined at the

board of directors meeting of ITOCHU held on July 8, 2020 after comprehensively

considering matters such as the fact that, of the valuation contents and results set

out in the Stock Valuation Report of the Company Shares obtained from Nomura

Securities on July 7, 2020 (the “Purchaser Side Stock Valuation Report”), the

19

Tender Offer Price in particular is within the range of the results of the valuation

using the DCF method, the results of the due diligence of the Company, whether

the Tender Offer is endorsed by the board of directors of the Company, trends in

the share price of the Company Shares, past examples of premiums granted in

tender offers for share certificates, etc. by persons other than the issuer, and the

prospect of shareholders tendering their shares in the Tender Offer, and the Tender

Offer Price is the amount obtained by adding a premium of 30.24% to 1,766

yen(rounded to two decimal places; hereinafter the same in calculating a premium

rate), which is the closing price of the Company Shares on the TSE First Section

on July 7, 2020, the business day immediately prior to the date of the

announcement regarding the conduct of the Tender Offer, 20.55% to 1.908 yen,

which is the simple average closing price of regular transactions during the past

month (from June 8, 2020 to July 7, 2020), 22.47% to 1,878 yen, which is the

simple average closing price of regular transactions during the past three months

(from April 8, 2020 to July 7, 2020), 11.22% to 2,068 yen, which is the simple

average closing price of regular transactions during past six months (from January

8, 2020 to July 7, 2020), respectively.

Further, not only is the Tender Offer Price a price that exceeds the upper limit of

the range of the per share value of the Company Shares calculated using the market

price analysis method (1,766 yen–2,068 yen) and the range of the per share value

of the Company Shares calculated using the comparable company analysis method

(946 yen–1,951 yen) in the Purchaser Side Stock Valuation Report and a price that

exceeds the median value of the range of the per share value of the Company

Shares calculated using the DCF method (1,701 yen –2,749 yen) in the Purchaser

Side Stock Valuation Report, but it is also a price that exceeds the upper limit of the

range of the per share value of the Company Shares calculated based on the market

price analysis method (1,766 yen –2,068 yen) in the Stock Valuation Report

regarding the results of the valuation of the Company Shares received by the

Company from Merrill Lynch Japan Securities as the Company’s financial advisor

on July 8, 2020 (the “Merrill Lynch Stock Valuation Report”) and it is a price

that is within the range of the per share value of the Company Shares calculated

using the comparable company analysis method (1,824 yen –2,922 yen) and the

range of the per share value of the Company Shares calculated using the DCF

Analysis (2,054 yen –3,432 yen) in the Merrill Lynch Stock Valuation Report.

As stated in the Tender Offer Statement dated July 9, 2020, according to an

analysis by ITOCHU and the Tender Offeror, as of July 8, 2020, which is the date

of the announcement that the Tender Offer will be conducted, it is likely investors

that in principle are likely to not tender their shares in a tender offer regardless of

the appropriateness of the transaction terms own approximately 30% of the

Company Shares (*), and they came to believe that only approximately 20%

(which is equal to 100% minus ITOCHU and IRI’s Ownership ratio of 50.10%

(i.e., approximately 50%) reduced by approximately 30%) of the Company Shares

might be held by the shareholders of the Company (not including ITOCHU, IRI,

and the Tender Offeror) that will decide whether to tender their shares in the

Tender Offer pursuant to their decision on the appropriateness of the terms of the

Transaction including the terms of the Tender Offer.

On that point, 79,017,884 shares of the Company Shares (Ownership ratio:

15.61%) were tendered in the Tender Offer, so ITOCHU believes that the

shareholders of the Company owning a majority of the approximately 20% of the

Company Shares it presumes are owned by the shareholders of the Company that

were to decide whether to tender their shares in the Tender Offer pursuant to their

20

decision on the appropriateness of the terms of the Transaction including the terms

of the Tender Offer decided that the terms of the Transaction including the terms of

the Tender Offer are appropriate.

(*) As stated in the “Fair M&A Guidelines” formulated by the Ministry of

Economy, Trade and Industry in June 2019, “as the scale of passive index

funds has increased in recent years as a trend in the Japanese capital markets,

some of these investors refrain, as a matter of policy, from tendering their

shares in response to a tender offer regardless of the appropriateness of the

transaction terms,” ITOCHU and the Tender Offeror have believed that there

are ETFs (Exchange-Traded Funds) that hold the Company Shares and other

passive index funds (Note 1) that refrain, as a matter of policy, from

tendering their shares in response to a tender offer regardless of the

appropriateness of the terms of the tender offer. As of July 6, 2020, ITOCHU

and the Tender Offeror confirmed that ETFs (Exchange-Traded Funds)

which are managed by linking them to stock indices and other indices, and

are listed on the TSE ( “TSE Listed ETFs”), alone hold approximately

20.19% (Note 2) of the Company Shares. ITOCHU and The Tender Offeror

have assumed that the TSE Listed ETFs refrain, as a matter of policy, from

tendering their shares in response to a tender offer regardless of the

appropriateness of the transaction terms because the TSE Listed ETFs, by

nature, focus on linking to indices. In addition, there are also passive index

funds other than the TSE Listed ETFs which hold the Company Shares

( “Other Passive Index Funds”. The total number of the Company Shares

held by Other Passive Index Funds cannot be ascertained by publicly

available information. Accordingly, ITOCHU and the Tender Offeror

requested that ITOCHU’s financial advisor, Nomura Securities Co., Ltd.

( “Nomura Securities”) estimate the number of the Company Shares held

by Other Passive Index Funds, based on publicly available information and

data base information made available by information vendors that provide

various data including financial markets data. While it is impossible to

ascertain the accurate number, and it would be difficult to provide an exact

estimate, Nomura Securities provided a trial calculation that approximately

10% of the Company Shares are likely to be held by Other Passive Index

Funds. The Tender Offeror assumes that since Other Passive Index Funds are

also passive index funds, they are generally managed with a focus on linking

to indices, and thus most refrain, as a matter of policy, from tendering their

shares in response to a tender offer regardless of the appropriateness of the

transaction terms. In light of the foregoing, ITOCHU and the Tender Offeror

have believed, based on its analysis, that approximately 30% of the

Company Shares are being held by investors who refrain, as a matter of

policy, from tendering their shares in response to a tender offer regardless of

the appropriateness of the transaction terms.

(Note 1) Passive index funds refer to funds that aim to secure a market average rate of

return by managing investments with an objective to link investment results

to indices such as a stock price index, which serve as a benchmark for the

market for stocks and other investment assets.

(Note 2) The figure refers to the ratio of the number of the relevant the Company

Shares held by the ETFs listed on the TSE as of July 6, 2020 (102,183,000

shares (rounded to the nearest thousand)) to the number of shares

(506,108,072 shares) remaining after subtracting the number of the treasury

shares (741,180 shares) held by the Company as of February 29, 2020, from

21

the total number of issued shares of the Company (506,849,252 shares) as of

the same date, both of which are disclosed in the Company’s Securities

Report.

The minimum tender offer period provided by law is 20 business days, but the

Tender Offeror set a relatively long tender offer period of 30 business days. By

setting a relatively long tender offer period, the Tender Offeror was endeavoring to

ensure the appropriateness of the Tender Offer Price by ensuring the shareholders

of the Company have an opportunity to properly decide whether to tender their

shares in the Tender Offer and ensuring parties other than the Tender Offeror have

an opportunity to make competing offers. Further, the Tender Offeror and the

Company have given consideration to securing fairness in the Tender Offer by not

reaching any agreement with terms that would restrict contact between competing

offerors and the Company such as an agreement with transaction protection

provisions that prohibit the Company from contacting competing offerors and, in

addition to setting the above tender offer period, ensuring competing offerors have

an opportunity to make competing offers. Hence, an opportunity was provided in

the Tender Offer to make competing offers, but no person other than the Tender

Offeror made a competing offer to the Company during the tender offer period of

the Tender Offer.

As explained above, ITOCHU determined that the amount of money to be

delivered to the shareholders of the Company upon the processing of fractions is

appropriate.

c. Disposition of important property, burden of major obligations, or any other event

that has material impact on the status of Company property that occurred after the

last day of the final business year

(i) The Tender Offer

As explained in “(1) Purpose and Grounds for the Share Consolidation” above,

ITOCHU and the Tender Offeror conducted the Tender Offer with a tender

offer period from July 9, 2020 to August 24, 2020, and as a result, ITOCHU and

the Tender Offeror came to own a total of 332,568,668 shares of the Company

Shares (Ownership ratio : 65.71%) on August 28, 2020 (the commencement

date of the settlement of the Tender Offer).

(ii) Cancellation of treasury shares

The Company passed a resolution at the board of directors meeting held today

to cancel 762,584 treasury shares on November 16, 2020.

The cancellation of those treasury shares is conditioned on the approval of the

proposal regarding the Share Consolidation as proposed at the Extraordinary

Shareholders Meeting, and the total number of issued shares of the Company

after the cancellation will be 506,086,668 shares.

(iii) Partial transfer of shares involving a change to a subsidiary

On July 8, 2020, the Company decided to transfer 5% of the shares of Taiwan

FamilyMart Co., Ltd., which is a subsidiary of the Company, to Pan Pacific

International Holdings Corporation (“PPIH”) or a joint venture that is newly

established by a subsidiary of a subsidiary of PPIH and the Company, and the

22

Company executed a memorandum of understanding with PPIH.

(b) Likelihood of Delisting

a. Delisting

As stated in “(1) Purpose and Grounds for the Share Consolidation” above, the

Company plans on conducting the Share Consolidation and the only shareholders

of the Company will be ITOCHU and the Tender Offeror on the condition that the

Share Consolidation has been approved by the shareholders at the Extraordinary

Shareholders Meeting. As a result, it is expected the Company Shares will be

delisted through designated procedures in accordance with the delisting criteria at

the Tokyo Stock Exchange.

With respect to the schedule of the delisting, it is expected the Company Shares

will be designated as stock to be delisted from October 22, 2020 to November 11,

2020 and the Company Shares will be delisted on November 12, 2020. It will not

be possible to trade the Company Shares on the Tokyo Stock Exchange after the

delisting.

b. Reason for the Purpose of the Delisting

In the retail industry in Japan, the environment surrounding the Company is

becoming more severe with changes in the market such as increasingly diversified

consumer needs and a trend among consumers to be more selective in addition to a

shrinking market size due to the decline in the total population, an increasingly

competitive environment across business types including an increase in the size of

the e-commerce market and the removal of barriers with other business types such

as drugstores, continued consumer cost consciousness, and a shortage of people in

stores and logistics. Under those circumstances, the Company has endeavored to

improve the quality of its existing stores and actively used its network of physical

stores, and it has been aware that implementing a new growth strategy that is not

based on store sales and transforming its existing business model are management

issues.

Under the aforementioned business environment, the Company reached a

conclusion (i) that going private through the Transactions will enable the Company

Group, on the one hand, and each of the other companies in the ITOCHU Group

and their closely related parties, on the other, to closely cooperate and collaborate

with each other, as well as to smoothly and efficiently implement matters such as

allowing mutual entry and access to external networks and (ii) that in the retail

industry, which is experiencing rapid changes in market conditions and

intensifying competition across business types, it is necessary to pursue a

transformation to a new business model that will revolutionize the traditional value

chain because that will enable both the Company Group and the entire ITOCHU

Group including the Company Group to further improve their corporate value.

Specifically, the Company was told by ITOCHU that by going private as a result of

the Transactions, it will be possible for further promote the mutual use of the

management resources, etc. of the ITOCHU Group and the Company and to

proceed with quick decision making as the ITOCHU Group, and the Company

believes that as a result of that, it will be able to seriously confront and work to

resolve issues such as 24-hour operation issues, serious labor shortage issues, and

food loss and waste issues, which are becoming social issues, and it will be

23

possible to develop its existing business model into a more efficient and profitable

business model by reviewing and reconstructing the existing value chain as a

whole.

The Company also believes that as e-commerce levels rise and the convenience

store market becomes saturated, it will be possible to create a new business model

through a fusion of physical and digital services by focusing on the strength of

consumer contact points, with approximately 15 million consumers visiting

approximately 16,500 stores each day, and by redefining the business model of the

Company. Specifically, by constantly carrying out tests that proactively incorporate

from ITOCHU’s network advanced next-generation technology from around the

world, the Company is aiming to streamline and improve the efficiency of existing

store operations and reduce the burden on member stores, and also to provide even

more convenient services to consumers. By establishing a “digital JV” that

includes strategic partners in and outside of Japan and the Company in the future,

for the fusion of the strength of physical stores with the versatility of digital

services in which digital platforms have strength, the Company will create new

additional value unbounded by existing boundaries of product sales and services

and will also consider making a drastic transformation from its existing labor-

intensive business model in the retail industry.

Further, the Company has been trying to move its growth focus from Japan, where

the limits of market growth are being reached due to a declining population, to

other countries by horizontally expanding its experience of success in the

convenience store business in Japan to overseas. However, as demonstrated by

China, retail business sectors have evolved in unique ways in other countries that

are completely different from Japan. Specifically, the appearance of fully Internet-

based platforms, represented by Alibaba, has enabled consumers living anywhere

to obtain products without going to physical stores at a much faster speed than the

popularization of modern retail businesses model, as typified by convenience

stores. In consideration of those circumstances, it is necessary to build and

introduce a model for each individual country in accordance with the growth

process of the retail market in that country without adhering strictly to existing

ideas and common sense. To achieve that, the Company believes it is necessary to

cooperate with partners within the ITOCHU Group network that have strengths not

only in retail but also in the areas of digital services and new technology, in

addition to the management resources and knowhow of the Company. Specifically,

the Company believes it will be possible to make overseas business expansion a

driving force for new growth of the Company by determining the next growth

market and the technology that will be the key to growth in that area through

overseas partners that are strategic business partners of ITOCHU and collaborating

with appropriate partners in each country.

The Company believes the early implementation of the above initiatives is

necessary to improve the medium- to long-term growth of the Company in the

fiercely competitive business environment of the Company, but given that the early

implementation of the above initiatives must be preceded by investments, the

business performance of the Company might deteriorate in the short term.

However, as long as the Company is listed, it will be necessary to respect the

interests of the shareholders of the Company, so it is currently difficult to

simultaneously and quickly execute investments that might cause the business

performance of the Company to deteriorate.

The Company believes that to implement initiatives to improve the medium- to

24

long-term corporate value of the Company including the above initiatives, it is

necessary to allocate even more management resources of the ITOCHU Group

than now and for the ITOCHU Group as a whole to implement agile management

measures, but as explained above, ITOCHU has explained that while the Company

is listed, there are certain restrictions on obtaining information on the Company

and allocating the management resources to the Company. The Company therefore

believes that it is necessary to take the Company private by implement of the

Transactions, in order to improve the medium- to long-term corporate value of the

Company by allocation of management resources of the ITOCHU Group and

agilely making decisions as a whole.

c. Impact on the minority shareholders and opinion on that impact

As stated in “a. Establishment of an independent special committee in the

Company” in “(c) Measures to Ensure the Fairness of the Transaction and

Measures to Avoid Conflicts of Interest” below, on July 7, 2020, the board of

directors of the Company received from the special committee the Report, which

stated that the special committee believes it would not be disadvantageous to the

minority shareholders of the Company for the board of directors of the Company

to (a) make a decision on the Transaction including the Tender Offer, which is a

decision to endorse the Tender Offer and to express an opinion that the decision on

whether to tender shares in the Tender Offer should be left to the shareholders of

the Company and (b) make a decision on making the Company private through the

Share Consolidation after the successful completion of the Tender Offer on the

assumption that will be done following the methods expected in the Transactions.

(c) Measures to Ensure the Fairness of the Transaction and Measures to Avoid Conflicts

of Interest

As stated in “(6) Measures to Ensure the Fairness of the Tender Offer Including

Measures to Ensure the Fairness of the Tender Offer Price and Measures to Avoid

Conflicts of Interest” in “3. Content, Grounds and Reasons for the Opinion on the

Tender Offer” in the Announcement of Opinion Pertaining to the Tender Offer of the

Company’s Shares by Retail Investment Company, LLC, a Subsidiary of ITOCHU

Corporation, the Parent Company (including subsequent revisions) announced by the

Company on July 8, the Company implemented the measures set out in a. through g.

below during the period before the commencement of the Tender Offer and the

measures set out in h. after receiving the document regarding the Request from

ITOCHU, from the perspective of ensuring fairness of the Transaction including the

Share Consolidation.

a. Establishment of an independent special committee at the company

(i) Background to the Establishment of the Special Committee

the Company established the special committee based on a written resolution of

the meeting of the board of directors of the Company held on February 19, 2020,

but prior to the establishment of the special committee and immediately after

the Company received an initial proposal from ITOCHU on February 17, 2020

about commencing deliberations about the Company going private, in order to

establish a system to discuss and negotiate the Transactions from the

perspective of improving the Company’s corporate value and ensuring the

interests of the Company’s general shareholders from a position independent

from the Tender Offeror and the Company individually explained to all of the

25

independent outside directors of the Company at that time based on advice from

Mori Hamada & Matsumoto that (a) it received the above proposal from

ITOCHU and (b) it is necessary to take full measures, including establishing a

special committee, in the course of conducting discussions and negotiations on

the Transactions to ensure the fairness of the transaction terms of the

Transactions including the Tender Offer Price because the Transactions

constitute transactions that are typified by issues such as the existence of

structural conflicts of interest and information asymmetry. The Company also

held a meeting on February 25, 2020 attended by Mr. Tadashi Izawa (outside

director of the Company, Chairman of the Japan-China Economic Association),

Ms. Mika Takaoka (outside director of the Company, professor of the College

of Business, Rikkyo University), and Ms. Chikako Sekine (outside director of

the Company, Representative Director of K.K. B Mind), who comprised all of

the independent outside directors of the Company at that time, and the

Company explained again that it received the above proposal from ITOCHU.

At that meeting, a Q&A session was held after Mori Hamada & Matsumoto

explained that it is necessary to fully secure the fairness of the procedures to

address issues in the Transactions such as the existence of structural conflicts of

interest and information asymmetry and explained the functions of the special

committee. At the same time, the Company verified the independence and

competence of its independent outside directors who were to be nominated as

special committee members with the advice of Mori Hamada & Matsumoto.

Thereafter, the Company confirmed that each of those candidate special

committee members is independent from ITOCHU and it has no material

interest in the successful or unsuccessful completion of the Transactions that is

different from the general shareholders and it had discussions with the

independent outside directors of the Company at that time who attended the

above meeting. The Company also obtained advice from Mori Hamada &

Matsumoto and appointed three people as candidate members of the special

committee: Mr. Tadashi Izawa, Ms. Mika Takaoka, and Ms. Chikako Sekine.

Thereafter, as explained above, the Company established the special committee

based on a resolution adopted at the extraordinary board of directors meeting

held on February 19, 2020, right after the Company received the initial written

proposal from ITOCHU on February 17, and the Company commissioned the

special committee to consider the Matters of Inquiry and submit its opinion

regarding the Matters of Inquiry to the Company. Further, the Company’s board

of directors passed a resolution that (a) when a decision is made regarding the

Tender Offer, including a decision on whether to endorse the Tender Offer, the

Company will give maximum respect to the contents of the special committee’s

judgment, (b) the Company will not endorse the Tender Offer if the special

committee judges that the transaction terms are unreasonable, and (c) it will

authorize the special committee to negotiate with the Tender Offeror, as

necessary, on the transaction terms and other matters, to appoint its own

financial, legal, and other advisors, as necessary, when responding to the

Matters of Inquiry (costs in that case are to be borne by the Company), and to

receive from the Company’s directors and employees information necessary for

deliberations and judgements on the Tender Offer.

It was also decided that a fixed fee is to be paid to each special committee

member as compensation for his or her duties regardless of the contents of the

report.

(ii) Background to the Deliberations

26

The special committee held a total of 27 meetings, totaling approximately 28

hours, during the period from February 25, 2020 to July 8, 2020. In addition, the

special committee conducted discussions and deliberations regarding the

Matters of Inquiry between the dates of the meetings, such as by providing

reports, sharing information, having discussions, and making decisions via e-

mail.

Specifically, the special committee first deliberated on matters such as the

independence, expertise, and past records of multiple candidate legal advisors

and candidate financial advisors and candidate third-party appraisal firms, and it

then appointed Nakamura, Tsunoda & Matsumoto to be its legal advisor

independent from the Tender Offeror, ITOCHU, Tokyo Century, Zen-Noh,

Nochu, and the Company, and it appointed PwC as its financial advisor and

third-party appraisal firm independent from ITOCHU, Tokyo Century, Zen-

Noh, Nochu, and the Company. The special committee confirmed that there

was no business relationship during the past three years between Nakamura,

Tsunoda & Matsumoto and any of ITOCHU, Tokyo Century, Zen-Noh, or the

Company, and there was a business relationship during the past three years

between Nakamura, Tsunoda & Matsumoto and Nochu, but the transaction

value was not large. The special committee also confirmed that there was a

business relationship during the past three years between PwC and each of

ITOCHU, Tokyo Century, Zen-Noh, Nochu, and the Company, but the

transaction values were not large and an internal system at PwC had been

established to block the flow of information.

The special committee confirmed that there was no problem in terms of the

independence or expertise of Mori Hamada & Matsumoto, which is the

Company’s legal advisor, and approved the appointment of Mori Hamada &

Matsumoto. Further, after deliberating on the independence and expertise of

Merrill Lynch Japan Securities, the special committee approved the

appointment of Merrill Lynch Japan Securities as the Company’s financial

advisor. The special committee also confirmed and approved the following: (a)

although Director Mikio Nishiwaki used to work at ITOCHU, considering the

fact that he is currently in the position of the General Manager of the Finance &

Accounting Division of the Company, he is familiar with quantitative

deliberations at the Company, and he is essential for the formulation of the

Company’s business plan and the calculation of the Company’s corporate value

based on that business plan, so the role of Director Mikio Nishiwaki in the

negotiations with ITOCHU will be limited as much as possible in a form in

which he is involved only in formulating the business plan necessary for

negotiations on the condition that other measures to ensure fairness have been

taken and not involved in the direct negotiations with ITOCHU and (b) there is

no other problem, from the perspective of independence, with the internal

system established by the Company for deliberations on the Transactions

(including the scope of directors and employees of the Company who will be

involved in deliberations, negotiations, and decisions on the Transactions, and

their specific duties).

The special committee then discussed and deliberated on measures that need to

be taken to ensure the fairness of the procedures in the Transactions in light of

legal advice received from Nakamura, Tsunoda & Matsumoto and opinions

heard from Mori Hamada & Matsumoto.

The special committee also asked ITOCHU questions in writing and received

27

responses from ITOCHU about matters such as the position of and future vision

for ITOCHU’s retail business, the Company’s role in that business, details of

the synergies expected from the Transactions and reasons why privatization is

necessary instead of the current capital structure, views on the management

policies and medium-term management plan of the Company after the

Transactions, reasons for the timing that has been selected and views on the

Tender Offer Price, views on personnel policies and governance after the

Transactions, views on the disadvantages of delisting, and the procedures and

terms of the Transactions. The special committee also received direct

explanations from and conducted Q&A sessions directly with the President of

the 8th Company and other people in charge at ITOCHU about those matters.

Moreover, even though Koji Takayanagi, Representative Director and

Chairman of the Company, and Takashi Sawada, Representative Director and

President of the Company, did not participate in deliberations on the

Transactions, the special committee asked that they attend a special committee

meeting from the perspective of gathering information and it obtained their

opinions as the Company’s management and related information about the

relationship between the future vision for the retail business of the Company

Group and the Transactions, the reasons why it is necessary to have the

Company go private and the synergies expected from the Transactions, their

views on the Transactions being conducted at this time, the disadvantages of

delisting, whether there are choices other than the Transactions and the details

of those choices (if any), and other relevant matters, and the special committee

held a Q&A session on those matters and discussed and deliberated those

matters.

When the Company prepared a business plan for the Transactions, the special

committee was given an explanation about the preparation policy by the

Company in advance. Even during the process of preparing that proposed

business plan, the Company gave several explanations to the special committee

on matters such as the contents of the proposed business plan, important

prerequisites, and the progress of the preparation of that business plan, and the

special committee confirmed and approved the reasonableness of matters such

as the contents of the final business plan, important prerequisites, and the

preparation background based on advice from a financial perspective from PwC

in addition to the above explanations. Thereafter PwC and Merrill Lynch Japan

Securities carried out valuations of the Company Shares based on the business

plans prepared by the Company for the second quarter of the fiscal year ending

February 2021 through the fiscal year ending February 2025. The special

committee was given explanations by PwC about the calculation methods used

in the valuation of the Company Shares by PwC, the reasons for using those

calculation methods, the details of the calculation made using each of those

calculation methods, and material conditions precedent for the valuation of the

Company Shares conducted by PwC (including the basis for the calculation of

discount rates in the DCF Analysis or the DCF Method and reasons for

selecting the comparable companies in the comparable company analysis or

comparable company method) (collectively, the “Calculation Methods”). The

special committee also received an explanation from Merrill Lynch Japan

Securities about the Calculation Methods used in the valuation of the Company

Shares by Merrill Lynch Japan Securities in response to a request by the

Company based on a request by the special committee. Based on the above

explanations, the special committee confirmed the reasonableness of those

matters after holding Q&A sessions and discussing and deliberating on those

28

matters.

Furthermore, the special committee received a prior explanation from the

Company about the negotiation policy, which was determined by the Company

based on advice from a financial perspective from Merrill Lynch Japan

Securities, pertaining to the Transactions including the fact that it will conduct

sufficient negotiations in line with the general negotiation process conducted in

M&As between mutually independent parties to extract from the Tender

Offeror the most advantageous transaction terms possible, and it approved that

negotiation policy after discussing and deliberating on the details of that policy

based on advice from a financial perspective from PwC. Whenever the

Company received a price proposal from ITOCHU since it received the first

proposal from ITOCHU on March 2, 2020 with a Tender Offer Price of 2,600

yen per share, the special committee received reports on the details of those

proposals from the Company in a timely manner and asked for the opinion of

the Company in light of advice from a financial perspective from Merrill Lynch

Japan Securities, and after the special committee discussed and deliberated on

the details of those proposals in light of advice from a financial perspective

from PwC, it instructed and requested the Company to request ITOCHU to

further increase the Tender Offer Price and, at that time, to request ITOCHU to

present a price that fully reflects the synergies that will be created by the

Transactions. Thus, the special committee was at the center of the discussions

and negotiations on the Tender Offer Price between the Company and ITOCHU.

As a result, the Company received from the Tender Offeror a final proposal that

includes a Tender Offer Price of 2,300 yen per share on July 2, 2020.

In addition, the special committee received several explanations from Mori

Hamada & Matsumoto about each draft of this press release and a Position

Statement concerning the Tender Offer to be disclosed or filed by the Company,

and the special committee confirmed that information will be fully disclosed

while obtaining advice from Nakamura, Tsunoda & Matsumoto.

(iii) Details of Judgments by the Special Committee

Under the above circumstances, the special committee submitted the Report

with contents that are substantially as follows to the board of directors of the

Company with the unanimous agreement of its members as a result of multiple

careful discussions and deliberations about the Matters of Inquiry based on the

details of the legal advice from Nakamura, Tsunoda & Matsumoto, advice from

a financial perspective from PwC, and the PwC Stock Valuation Report

submitted by PwC on July 7, 2020.

I. Contents of the Report

ⅰ The special committee believes it is appropriate for the board of the

directors of the Company to endorse the Tender Offer and express an opinion

that the decision on whether to tender shares in the Tender Offer should be left

to the judgment of the shareholders of the Company.

ⅱ The special committee believes it would not be disadvantageous to the

minority shareholders of the Company for the board of directors of the

Company to make a decision to endorse the Tender Offer and to decide on an

opinion that the decision on whether to tender shares in the Tender Offer should

be left to the shareholders of the Company. The special committee believes it

29

would not be disadvantageous to the minority shareholders of the Company for

the board of directors to make a decision pertaining to making the Company

private through the Share Consolidation after the successful completion of the

Tender Offer on the assumption that will be done following the methods

expected in the Transactions.

II. Deliberations

ⅰ Based on the following points, the special committee believes the

Transactions will contribute to the improvement of the corporate value of the

Company.

• It is expected the future of the environment surrounding the retail industry of

the Company will continue to be uncertain given factors such as the

increasingly competitive environment across business types, the decline in

consumer confidence resulting from deep-rooted budget-mindedness, and the

impact of the spread of COVID-19. Further, in addition to the diversification

of consumer needs and calls for the creation of goods and services from a

fresh perspective, corporate social responsibility is growing with respect to

issues such as securely providing safe food and addressing environmental

issues.

• The Company Group is combining management resources and exploring

growth opportunities by providing unique value in order to succeed in an

extremely competitive environment after going through that difficult period.

Specifically, the Company Group is implementing the following measures:

making steady progress implementing franchise store support initiatives;

strengthening profitability; responding to the spread of COVID-19; advancing

financial and digital strategies; and promoting business collaboration with Pan

Pacific International Holdings Corporation (PPIH).

• With respect to the proposed initiatives to be implemented after the

Transactions, the Company is a subsidiary of ITOCHU and there might be an

issue with respect to whether those initiatives can be implemented under the

capital structure as of July 7, 2020, but according to ITOCHU, given the

characteristics of the business model of ITOCHU as a trading company,

ITOCHU operates in a wide range of business domains and it does not

necessarily have the same interests as the Company in each business domain,

and both ITOCHU and the Company currently carry out their business

operations as independent listed companies, so given that in pursuing close

synergies and effective use of the management resources and knowhow

between the Company and each other company in the ITOCHU Group, it is

necessary to give careful consideration, even taking into account the interests

of the minority shareholders of the Company with respect to the objective

fairness of that effective use as transactions, there are certain restrictions such

as the fact that there is not sufficient information sharing on matters such as

the cost structures of both sides or redistribution of personnel and material

management resources, and by further promoting the complementary use of

each other’s management resources and knowhow and agilely making

decisions together with the ITOCHU Group, it will become possible to carry

out fundamental measures that will lead to medium- to long-term growth of

the ITOCHU Group as a whole including the Company, even if that is not

directly connected to short-term profits of the Company, and to establish an

30

even stronger alliance.

• Further, with respect to the reason for implementing the Transactions when

the impact of the spread of COVID-19 is not entirely clear, ITOCHU was

initially aware before the outbreak of COVID-19 that there was pressure to

revise the business model of the convenience store business and that business

domains are being eroded by the rapid expansion of e-commerce, but it now

believes that the Company needs the support of ITOCHU for a V-shaped

recovery from the impact of the spread of COVID-19, and it is necessary to

implement the Transactions now because the “digital JV idea” proposed by

ITOCHU would be too late if the parties waited until the impact of COVID-19

becomes objectively clear.

• In response to the proposals by ITOCHU, the management of the Company

indicated a view that it believes making the Company private through the

Transactions and the subsequent measures will contribute to the improvement

of the corporate value of the Company because (i) the retail business model is

changing to a business model that will enhance the quality in a limited market,

a wealth of personnel and resources of ITOCHU related to the areas of the

management department, digital, and overseas expansion will be allocated to

the Company as a result of the Company being made private through the

Transactions, and the diversification of the personnel and resources of the

Company will be a source of growth of the Company, (ii) if the Company is

made private through the Transactions, it will make faster decisions, and (iii)

some of the initiatives proposed by ITOCHU have already been initiated

under the capital structure as of July 7, 2020, but once the Company is made

private through the Transactions, it will be able to make management

decisions with greater freedom and it will be able to proceed with initiatives

with a greater sense of speed.

• At the same time, the disadvantages of the Transactions are abstract concerns

such as lower motivation among employees and franchise stores as a result of

the Company becoming private through the Transactions, but according to the

management of the Company, it is necessary to consider how employees and

franchise stores perceive the Transactions, and the management of the

Company believes it is necessary to communicate sufficiently with employees

and franchise stores and explain the significance of the Transactions to

employees and franchise stores, but no other specific disadvantages are

particularly expected.

• Hence, the management of the Company indicated a view that the

Transactions and the subsequent initiatives would contribute to the

improvement of the corporate value of the Company, and there are no

particular unreasonable points in that view, and the special committee also

believes that the specific initiatives proposed by ITOCHU with respect to the

Transactions will promote the digital strategy of the Company Group and

contribute to the Company’s overseas expansion, particularly in China, and

that will contribute to the improvement of the corporate value of the Company.

ⅱ The special committee believes fair procedures from the perspective of

ensuring the interests of the general shareholders of the Company are being

implemented given that it is recognized that (i) an independent special

committee has been established in the Company and that special committee has

functioned effectively, (ii) the special committee and the Company have

31

obtained independent expert advice from external experts, (iii) each of the

special committee and the Company obtained a stock valuation report from an

independent third-party appraisal firm with expertise as a basis for their

judgments on the Transactions, (iv) the Company built a structure that excludes

directors and other people who have a special interest from discussions and

negotiations on the Transactions as much as possible and allows it to have

discussions and negotiations from a position that is independent from ITOCHU,

(v) a so-called indirect market check is being conducted in the Tender Offer,

(vi) it is expected it will be ensured that the general shareholders of the

Company will have a chance to make proper decisions in the Tender Offer

based on sufficient information, and (vii) practical measures are being taken that

are desirable in the Fair M&A Guidelines formulated by the Ministry of

Economy, Trade and Industry in June 2019, and coercion has been eliminated.

Further, even though a majority of minority condition has not been set in the

Tender Offer, a lower limit on the number of shares to be purchased has been

set so that the Ownership ratio of the Tender Offeror and ITOCHU will be at

least 60% if the Tender Offer is successfully completed. Although it is believed

that minimum will function as a measure to secure fairness to a certain extent in

the sense that the Tender Offer will not be successfully completed without a

considerable number of general shareholders tendering their shares, given that

reasonable grounds for the number of shares in that minimum cannot be

confirmed, it is believed it cannot be said that the setting of that minimum is

sufficient in light of the purpose of majority of minority conditions. However,

given that other sufficient measures to secure fairness in the Transactions have

been taken, even if a majority of minority has not been set, and it cannot be said

that the setting of a minimum is sufficient in light of the purpose of majority of

minority, it is believed the fairness of the procedures in the Transactions will be

prejudiced solely because of the setting of that minimum.

ⅲ With respect to the appropriateness of the transaction terms of the

Transactions, based on the following points, the purchase method and the type

of consideration for the purchase in the Transactions are considered reasonable,

but although the Tender Offer Price has a certain level of reasonableness from

the perspective of providing the general investors of the Company an

opportunity to earn a return on their investments and it cannot be recognized

that the Tender Offer Price lacks validity, it is not thought the Tender Offer

Price is at a level where the Company can actively recommend that its general

shareholders should tender their shares in the Tender Offer.

• With respect to the method of purchasing in the Transactions, the method of

conducting the Tender Offer in the first stage and conducting the Share

Consolidation in the second stage is a method that is generally adopted in

privatization transactions such as the Transactions. Further, given that

ITOCHU and the Company have different businesses and it is possible to

avoid the risk of the share price of ITOCHU falling, it is believed the type of

consideration for the purchase is reasonable for the general shareholders of the

Company to use the method of a two-stage transaction where a tender offer is

conducted with cash as consideration in the first stage, and then the Share

Consolidation is conducted with fractions processed using cash as the second

stage, rather than using a method of a single-stage transaction where the shares

of ITOCHU are consideration.

• It is recognized that there are no particular unreasonable points with respect to

32

the purpose and procedures of the formulation of the business plan of the

Company that is the basis for the calculations using the DCF Method in the

PwC Stock Valuation Report and the DCF Analysis in the Merrill Lynch

Japan Securities Stock Valuation Report or the contents of that business plan.

• It is not recognized that there are any unreasonable points in the valuation

method or the contents of the PwC Stock Valuation Report and the special

committee has judged that the PwC Stock Valuation Report is credible, and it

is recognized that although the Tender Offer Price is above the maximum of

the range of the results of the valuation using a market share price analysis and

a comparable companies analysis in the PwC Stock Valuation Report, it is

below the minimum of the range of the results of the valuation using the DCF

Method in the PwC Stock Valuation Report.

• It is not recognized that there is any arbitrariness in the valuation method or

the contents of the Merrill Lynch Japan Securities Stock Valuation Report and

the special committee has judged that the Merrill Lynch Japan Securities

Stock Valuation Report is credible, and it is recognized that the Tender Offer

Price is above the maximum of the range of the results of the valuation using a

market price analysis in the Merrill Lynch Japan Securities Stock Valuation

Report and is within the range of the results of the valuation using a trading

comparables analysis and the DCF Analysis in the Merrill Lynch Japan

Securities Stock Valuation Report.

• Although the Tender Offer Price is a price with a certain premium on the

market price, that premium is below both the average and the median the

tender offers for all shares that have been announced in similar transactions

(other tender offers with a purchase size of at least 50 billion yen for the

purpose of making a company private that have been announced since 2010),

and it is not recognized that a sufficient premium has been added in

comparison to similar transactions.

• The special committee has been substantially involved in the process of

discussions and negotiations between the Company and ITOCHU with respect

to the transaction terms of the Transactions including the Tender Offer Price,

and serious negotiations have been conducted after ensuring that the Company

has used reasonable efforts with the aim of the Transactions being conducted

with transaction terms that are as favorable as possible for the general

shareholders, or in other words, there are conditions that can be regarded the

same as an arm’s-length transaction, but ultimately the Company and

ITOCHU did not reach an agreement on the Tender Offer Price.

• It is believed that the Tender Offer Price is not disadvantageous to the

minority shareholders in the sense that a certain premium has been added to

the market share price of the Company Shares. Further, in addition to that, the

special committee believes that given that the Tender Offer Price is within the

range of valuation results obtained using the DCF Analysis in the Merrill

Lynch Japan Securities Stock Valuation Report that was prepared by Merrill

Lynch Japan Securities that has been approved by the special committee as a

third-party appraisal firm independent from the Company and that the special

committee has judged to be credible because it has not found any particular

unreasonable points in the valuation method or the contents as described

above, the Tender Offer Price has a certain level of reasonableness from the

perspective of providing the general shareholders of the Company an

33

opportunity to earn a return on their investments and it cannot be recognized

that the Tender Offer Price lacks validity. However, given that the Tender

Offer Price is below the minimum of the range of the results of the valuation

using the DCF Method in the PwC Stock Valuation Report and that it is not

recognized that a sufficient premium has been added to the market share price

of the shares of the Company in comparison to similar transactions, it cannot

be recognized that the Tender Offer Price is at a level where the Company can

actively recommend that its general shareholders should tender their shares in

the Tender Offer

ⅳ As explained in i. above, given that it is recognized that the Transactions

including the Tender Offer and the subsequent initiatives will contribute to the

improvement of the corporate value of the Company, the special committee

believes it is reasonable for the board of directors of the Company to endorse

the Tender Offer. However, as explained in ii. above, fair procedures to ensure

the interests of the general shareholders of the Company are being implemented

in the Transactions, and as explained in iii above, it is recognized that the

purchase method and the type of consideration for the purchase in the

Transactions are reasonable, and, from the perspective of providing the general

shareholders of the Company an opportunity to earn a return on their

investments, the Tender Offer Price has a certain level of reasonableness and it

cannot be recognized that the Tender Offer Price lacks validity, but given that it

cannot be recognized that the Tender Offer Price is at a level where the

Company can actively recommend that its general shareholders should tender

their shares in the Tender Offer, the board of directors of the Company cannot

recommend that the shareholders of the Company tender their shares in the

Tender Offer, so it is believed it is appropriate to leave the decision of whether

to tender shares in the Tender Offer to the judgement of the shareholders of the

Company.

ⅴ As explained in i. above, it is recognized that the Transactions and the

subsequent initiatives will contribute to the improvement of the corporate value

of the Company, so it is believed that the decision by the board of directors of

the Company to express an opinion endorsing the Tender Offer would not be

disadvantageous to the minority shareholders of the Company. Further, as

explained in ii. above, fair procedures are being carried out to secure the

interests of the general shareholders in the Transactions, and as explained in iii.

above, with respect to the transaction terms of the Transactions, the purchase

method and the type of consideration for the purchase are considered reasonable.

While it is not believed that the Tender Offer Price is at a level where the

Company can actively recommend that its general shareholders should tender

their shares in the Tender Offer, the Tender Offer Price has a certain level of

reasonableness from the perspective of providing the general shareholders of

the Company an opportunity to earn a return on their investments, and it cannot

be recognized that the Tender Offer Price lacks validity from the perspective of

providing the general shareholders of the Company an opportunity to earn a

return on their investments, so it is believed that decision by the board of

directors of the Company to leave the decision of whether to tender shares in

the Tender Offer to the judgment of the shareholders of the Company after

disclosure of the grounds therefor instead of actively recommending that the

shareholders of the Company tender their shares in the Tender Offer would not

be disadvantageous for the minority shareholders of the Company. Further, if

the Company is made private after the successful completion of the Tender

34

Offer, the Tender Offeror will make a request to convene the Special

Shareholders’ Meeting where the Share Consolidation is one of agenda items. It

is expected money in an amount equivalent to the Tender Offer Price per share

would be delivered to the shareholders other than ITOCHU and the Tender

Offeror if a proposal for the Share Consolidation is approved at that Special

Shareholders’ Meeting. And if the Company receives a request to convene the

Special Shareholders’ Meeting from the Tender Offeror, it plans on convening

the Special Shareholders’ Meeting where a shareholders’ proposal for the Share

Consolidation is one of agenda items in response to that request. Hence, based

on the assumption that, among other things, making the Company private after

the Tender Offer will be led by the Tender Offeror and the role of the Company

will be limited, it is believed that it would not be disadvantageous for the

minority shareholders of the Company for the board of directors to make a

decision pertaining to making the Company private through the Share

Consolidation after the successful completion of the Tender Offer in the

Transactions for the reasons, among other things, that as explained in i. above, it

is believed that the Transactions and the subsequent measures will contribute to

the improvement of the corporate value of the Company, that the amount

expected to be delivered to the shareholders at the time of the Share

Consolidation would be the same as the Tender Offer Price, and therefore has a

certain level of reasonableness from the perspective of providing the general

shareholders of the Company an opportunity to earn a return on their

investments and cannot be recognized as an amount that lacks validity, that it

would take time and be costly to leave the convocation of the Special

Shareholders’ Meeting to a decision of a competent court, instead of the

Company to convene the Special Shareholders’ Meeting in response to a

request by the Tender Offeror, which might be against the interests of its minor

shareholders, and that it is possible for the shareholders that oppose the Share

Consolidation to make a request to the Company to purchase their shares and

file a petition with a competent court for a determination of the share price.

Further, a lower limit on the number of shares to be purchased has been set in

the Tender Offer so that the Ownership ratio of the Tender Offeror and

ITOCHU after the Tender Offer will be 60%, so the Company might not be

made private even if the Tender Offer is successfully completed. With respect

to that point, considering factors such as the attendance rates at past

shareholders meetings of the Company, even 60% is effectively nearly two-

thirds of the shareholders in attendance, so considering that the shareholders

that have not tendered their shares in the Tender Offer may exercise their voting

rights to approve the Tender Offer (for example, ITOCHU expects there are

ETFs listed on the Tokyo Stock Exchange and passive index funds other than

ETFs listed on the Tokyo Stock Exchange that will approve the agenda item of

the shareholders meeting for the Share Consolidation even if they do not tender

their shares in the Tender Offer), it is believed it is not highly likely the Share

Consolidation will not be approved and the Company will not be made private.

The special committee therefore believes that it cannot be said that the

shareholders of the Company will be put in an extremely unstable position

b. Advice Obtained by the Special Committee from an Independent Legal Advisor

As explained in “ a. Establishment of an Independent Special Committee at the

Company” above, in order to obtain expert advice on the fairness of the procedures,

the special committee appointed Nakamura, Tsunoda & Matsumoto as its legal

35

advisor independent from ITOCHU, Tokyo Century, Zen-Noh, Nochu, and the

Company, and obtained legal advice, including advice concerning matters such as

measures to be taken to ensure the fairness of the procedures in the Transactions,

various procedures of the Transactions, and the method and process of deliberations

by the special committee on the Transactions.

Nakamura, Tsunoda & Matsumoto is not a related party of ITOCHU, Tokyo Century,

Zen-Noh, Nochu, or the Company and it does not have any significant interest in

relation to the Transactions, including the Tender Offer. For more details on the

independence of Nakamura, Tsunoda & Matsumoto, see “a. Establishment of an

Independent Special Committee at the Company” above.

c. Stock Valuation Report Obtained by the Special Committee from an Independent

Financial Advisor and Third-Party Appraisal Firm

As explained in “a. Establishment of an Independent Special Committee at the

Company”, in order to obtain expert advice and support on matters such as the

valuation of the corporate value and price negotiations, the special committee

appointed PwC as its financial advisor and third-party appraisal firm independent

from ITOCHU, Tokyo Century, Zen-Noh, Nochu, and the Company, and obtained

advice from a financial perspective including the policy for negotiations with

ITOCHU, and it obtained the PwC Stock Valuation Report dated July7, 2020.

PwC is not a related party of the Tender Offeror, ITOCHU, Tokyo Century, Zen-Noh,

Nochu, or the Company and it does not have any significant interest in relation to the

Transactions, including the Tender Offer. For more details on the independence of

PwC, see “a. Establishment of an Independent Special Committee at the Company”

above.

The descriptions set forth below are summaries of the material financial analyses

presented by PwC to the special committee in connection with the above-mentioned

PwC Stock Valuation Report. The PwC Stock Valuation Report is based on financial,

economic, monetary, market and other conditions and circumstances as in effect on,

and the information made available to PwC as of, the date of the report. It should be

understood that subsequent developments may affect the PwC Stock Valuation Report,

and PwC does not have any obligation to update, revise, or reaffirm such report.

In order to collect and examine information required for calculating the value of the

Company Shares, PwC obtained information and received explanations on the

Company’s current business status and forecasted business outlook from the

Company’s management, and calculated the value of the Company Shares based on

such information, subject to the assumptions set forth in the below (Note) and certain

other conditions.

After considering the methodologies to be applied to calculate the value of the

Company Shares among the various share valuation methodologies, and based on the

premise that the Company was a going concern and from the perspective that it would

be appropriate to assess the value of the Company Shares in multiple ways upon

consideration of matters such as its financial status and trends in the share price of the

Company Shares, PwC calculated the value of the Company Shares using: (a) the

market price method as the share has an observable market price; (b) the comparable

company method as there were multiple listed companies engaged in businesses

36

similar to that of the Company and it was possible to draw analogies with the market

valuations of comparable companies; and, (c) the “DCF Method” for reflecting the

status of future business activities in the valuation.

The following is the ranges of values per the Company Shares that were calculated by

PwC based on each calculation method set out above.

Market Price Method: 1,766 yen – 2,068 yen

Comparable Company Method: 1,694 yen – 2,168 yen

DCF Method: 2,472 yen – 3,040 yen

In the market price method, July 7, 2020 was set as the valuation reference date, the

value of the Company Shares (per share) was calculated to range from 1,766 yen to

2,068 yen (rounded to the nearest yen), based on the closing price as of the reference

date (1,766 yen), the simple average closing price for the one month (1,908 yen), three

months (1,878 yen) and six months (2,068 yen) up to the reference date for the

Company Shares on the First Section of the TSE, respectively.

In the comparable company method, the value of the Company Shares was analyzed

through comparison with the share price and financial indicators which show the

profitability, etc. of listed companies that operated business relatively similar to the

Company’s. The value of the Company Shares (per share) was calculated to range

from 1,694 yen to 2,168 yen, based on the PER compared to Seven & i Holdings Co.,

Ltd. and Lawson, Inc. as comparable companies, each of which was selected among

the listed companies in Japan that engage mainly in the convenience store business,

comprehensively taking into account their similarities to the Company in terms of

market capitalization, scale of business, business operating area and other factors.

In the DCF Method, the value of the Company Shares (per share) was calculated to

range from 2,472 yen to 3,040 yen which results from analyzing the Company’s

corporate value by discounting to the present value at a certain discount rate the free

cash flow that the Company is expected to generate in the second quarter of the fiscal

year ending February 2021 and onward based on factors such as its business plans for

the period from the second quarter of the fiscal year ending February 2021 to the

fiscal year ending February 2025 prepared by the Company, the interview with the

Company management and publicly available information. The discount rate

(weighted-average cost of capital) adopted was 3.31% to 3.91%, the perpetual growth

method was applied in the valuation of the going concern value of the Company and

the perpetual growth rate was 0%.

The consolidated financial forecast prepared based on the business plan provided by

the Company (the “Consolidated Financial Forecast”), used by PwC as the basis of

the DCF Method, is as follows. As for the Consolidated Financial Forecast, the special

committee confirmed the content, important assumptions and the reasonableness of

the background for preparation thereof, etc., as set out in “a. Establishment of an

Independent Special Committee at the Company” above. Please note that as for the

business plan based on which the above-mentioned DCF Method was conducted, no

substantial increase/decrease in profits is expected. The synergies expected by the

Transactions being completed is not reflected in the Consolidated Financial Forecast

37

because it is difficult to specifically estimate those synergies as of the PwC Stock

Valuation Report.

(In 100 million Yen)

FY ending

February 2021

(nine months)

FY ending

February 2022

FY ending

February 2023

FY ending

February 2024

FY ending

February 2025

Revenue 3,482 4,830 5,283 5,562 5,619

Gross Profit 480 688 724 724 779

EBITDA 1,882 2,466 2,520 2,543 2,606

Free Cash

Flow 345 640 480 696 805

(Note) In the valuation of the Company Shares, PwC adopted all relevant information received

from the Company as is, in principle, and all relevant publicly available information as

is, assuming that all of such materials and information, etc. were accurate and complete

and that there was no fact that might have a material impact on the valuation of the

Company Shares, which has not been disclosed to PwC, etc. and PwC has not

independently verified the accuracy and completeness thereof. In addition, PwC has

not independently valued or assessed the assets or liabilities (including off-the-book

assets and liabilities and other contingent liabilities) of the Company and its affiliates

and has not requested a third-party body for the said valuation, estimate or assessment.

Furthermore, PwC assumed that the financial projections provided by the Company

(including business plans and other information) were prepared by the management of

the Company based on the best estimates and judgment as of July 7, 2020. The

valuation performed by PwC reflected the information and economic conditions up to

July 7, 2020.

d. Advice Obtained by the Company from an Independent Legal Advisor

As explained in “a. Establishment of an Independent Special Committee at the

Company” above, in order to obtain expert advice on the fairness of the procedures,

the Company appointed Mori Hamada & Matsumoto as its legal advisor independent

from the Tender Offeror, ITOCHU, Tokyo Century, Zen-Noh, Nochu, and the

Company, and obtained legal advice, including advice concerning matters such as

measures to be taken to ensure the fairness of the procedures in the Transactions,

various procedures of the Transactions, and the method and process of deliberations

by the Company on the Transactions.

Mori Hamada & Matsumoto is not a related party of the Tender Offeror, ITOCHU,

Tokyo Century, Zen-Noh, Nochu, or the Company and it does not have any

significant interest in relation to the Transactions, including the Tender Offer.

e. Stock Valuation Report Obtained by the Company from an Independent Financial

Advisor and Third-Party Appraisal Firm

As explained in “a. Establishment of an Independent Special Committee at the

Company” above, in order to obtain expert advice and support on matters such as the

valuation of the corporate value and price negotiations, the Company appointed

38

Merrill Lynch Japan Securities as its financial advisor and third-party appraisal firm

independent from the Tender Offeror, ITOCHU, Tokyo Century, Zen-Noh, Nochu,

and the Company and obtained advice from a financial perspective, and it obtained

the Merrill Lynch Japan Securities Stock Valuation Report dated July 8, 2020.

Merrill Lynch Japan Securities is not a related party of the Tender Offeror, ITOCHU,

Tokyo Century, Zen-Noh, Nochu, or the Company and it does not have any significant

interest in relation to the Transactions, including the Tender Offer

The descriptions set forth below are summaries of the material financial analyses

presented by Merrill Lynch Japan Securities to the board of directors of the Company

in connection with the above-mentioned Merrill Lynch Japan Securities Stock

Valuation Report. The Merrill Lynch Japan Securities Stock Valuation Report is

based on financial, economic, monetary, market and other conditions and

circumstances as in effect on, and the information made available to Merrill Lynch

Japan Securities as of, the date of the report. It should be understood that subsequent

developments may affect the Merrill Lynch Japan Securities Stock Valuation Report,

and Merrill Lynch Japan Securities does not have any obligation to update, revise, or

reaffirm such report.

After considering the various valuation methods of the equity value of the Company

Shares, Merrill Lynch Japan Securities assessed the equity value of the Company

Shares using (i) the market price analysis because the Company Shares are listed on

the First Section of the Tokyo Stock Exchange, (ii) the trading comparables analysis

because there are numerous listed companies comparable to the Company and it is

possible to value the Company Shares by comparing with such comparables, and (iii)

the discounted cash flow method (the “DCF Analysis”) so as to reflect in the

evaluation the status of future business activities, subject to the condition precedent set

forth below (Note) and certain other conditions, based on the premise that the

Company is a going concern and from the perspective that it would be appropriate to

assess the share value of the Company Shares in multiple ways. According to

Merrill Lynch Japan Securities, the methods used, and the corresponding ranges of

per-share price of the Company Shares evaluated by such methods, are as follows.

For assumptions, points of attention, etc. in the preparation of the Merrill Lynch Japan

Securities Stock Valuation Report and the underlying valuation analysis therefor,

please refer to the (Note) below.

Market Price Analysis: 1,766 yen –2,068 yen

Trading Comparables Analysis: 1,824 yen – 2,922 yen

DCF Analysis: 2,054 yen – 3,432 yen

Under the market price analysis, July 7, 2020 was set as the valuation reference date,

the per-share price of the Company Shares was assessed to range from 1,766 yen to

2,068 yen, based on the closing price on the reference date (1,766 yen), the simple

average closing price for the most recent one month period (1,908 yen), the simple

average closing price for the most recent three month period (1,878 yen) and the

simple average closing price for the most recent six month period (2,068 yen) of the

Company Shares on the First Section of the Tokyo Stock Exchange.

Under the trading comparables analysis, the Company’s share value was analyzed via

comparison with market share prices and financial indices indicating profitability, etc.

of various listed companies engaged in relatively similar, albeit not completely

identical, businesses to those of the Company, selected for the purpose of analysis.

39

The per share value of the Company Shares was assessed to range from 1,824 yen to

2,922 yen, based on the ratio of PER to the equity value compared to Seven & i

Holdings Co., Ltd., Lawson, Inc., Nitori Holdings Co., Ltd., Pan Pacific International

Holdings Corporation, Welcia Holdings Co., Ltd. and Tsuruha Holdings Inc., each of

which is deemed to be a listed company having similarities to the Company, and was

selected after comprehensively taking into consideration the market capitalization and

the scale of business, the similarities of areas in which the Company has operations

and business structure and other factors

Under the DCF Analysis, the per-share value of the Company Shares was evaluated to

range from 2,054 yen to 3,432 yen, after analyzing the enterprise value and the equity

value of the Company based on the financial forecast from the second quarter ended

February 2021 to the fiscal year ending February 2025 (including the free cash flow)

prepared by the Company, by discounting such free cash flow to the present value at a

certain discount rate. Please note that the discount rate (weighted average cost of

capital) adopted, which was analyzed based on the CAPM (Capital Asset Pricing

Model) theory generally used in share price valuation practice, is 3.25% to 4.00% as

to the core business and 3.25% to 4.00% as to the FamilyMart business in Taiwan.

The perpetual growth rate method is adopted for the evaluation of the going concern

value, and the ratio of -0.25% to 0.25% and 1.50% to 2.00% are adopted as the

perpetual growth rate as to the core business and the FamilyMart business in Taiwan,

respectively, under the perpetual growth rate method after consultation and

confirmation with the Company.

The Consolidated Financial Forecast, used by Merrill Lynch Japan Securities as the

basis of the DCF Analysis, is as stated in“(ii) Outline of Valuation” in “c. Stock

Valuation Report Obtained by the Special Committee from an Independent Financial

Advisor and Third-Party Appraisal Firm” above.

(Note) The above-mentioned Merrill Lynch Japan Securities Stock Valuation

Report has been delivered solely for the use and benefit of the board of

directors of the Company in its capacity as such in connection with and for

purposes of its evaluation of the Tender Offer Price from a financial point of

view. The Merrill Lynch Japan Securities Stock Valuation Report does not

express any opinion or view with respect to any consideration received in

connection with the Transactions by the holders of any class of securities,

creditors or other constituencies of any party. The Merrill Lynch Japan

Securities Stock Valuation Report does not express any opinion or view as to

the fairness of the Tender Offer Price or as to any terms or other aspects or

implications of the Transactions, including, without limitation, the form or

structure of the Transactions or any terms or other aspects or implications of

any other agreement, arrangement or understanding entered into in

connection with or related to the Transactions or otherwise. Furthermore,

Merrill Lynch Japan Securities does not express any opinion or view as to

the relative merits of the Transactions in comparison to other strategies or

transactions that might be available to the Company or in which the

Company might engage or as to the underlying business decision of the

Company to proceed with or effect the Transactions. In addition, Merrill

Lynch Japan Securities does not express any opinion or recommendation to

any stockholder of the Company as to whether to tender their Company’s

shares in the Tender Offer or how to vote or act in connection with the

Transactions or any related matter. Moreover, Merrill Lynch Japan

40

Securities also does not express any opinion or view with respect to, and

have relied, with the consent of the Company, upon the assessments of the

Company regarding legal, regulatory, accounting, tax and similar matters

relating to the Company or any other entity and the Transactions (including

the contemplated benefits thereof). In addition, Merrill Lynch Japan

Securities is not expressing any opinion or view with respect to, and have

relied, with the consent of the Company, upon the assessments of the

Company, regarding the proposed transaction in which the Company will

dispose of certain of its interest in Taiwan FamilyMart Co., Ltd. (the

“Taiwan FM Transaction”). In addition, Merrill Lynch Japan Securities

does not express any opinion or view with respect to the fairness (financial

or otherwise) of the amount, nature or any other aspect of any compensation

to any of the officers, directors or employees of any party to the Transactions,

or class of such persons, relative to the Tender Offer Price or otherwise.

The Merrill Lynch Japan Securities Stock Valuation Report does not express

any opinion as to the prices at which the Company Shares will be traded at

any time, including following the announcement or consummation of the

Transactions.

In preparing the Merrill Lynch Japan Securities Stock Valuation Report and

conducting its underlying valuation analysis, Merrill Lynch Japan Securities

reviewed certain publicly available information concerning the business and

financial matters of the Company, as well as the business and financial

information inside the Company (including the Consolidated Financial

Forecast) which was either provided by the management of the Company to

Merrill Lynch Japan Securities or with which Merrill Lynch Japan Securities

discussed with the management of the Company. Merrill Lynch Japan

Securities has assumed and relied upon, without independent verification,

the accuracy and completeness of the financial and other information and

data publicly available or provided to or otherwise reviewed by or discussed

with Merrill Lynch Japan Securities and has relied upon the assurances of the

management of the Company that they are not aware of any facts or

circumstances that would make such information or data inaccurate or

misleading in any material respect. Further, with respect to the

Consolidated Financial Forecast, Merrill Lynch Japan Securities has been

advised by the Company, and has assumed, with the consent of the Company,

that it has been reasonably prepared on bases reflecting the best estimates

available as of the date of the Merrill Lynch Japan Securities Stock Valuation

Report and good faith judgments of the management of the Company as to

the future financial performance of the Company. In particular, with

respect to the Taiwan FM Transaction, Merrill Lynch Japan Securities has

relied on the information provided by the Company to Merrill Lynch Japan

Securities as to the impact of such transaction to the Company for purposes

of the Merrill Lynch Japan Securities Stock Valuation Report. The Merrill

Lynch Japan Securities Stock Valuation Report is necessarily based on

financial, economic, monetary, market and other conditions and

circumstances as in effect on, and the information made available to Merrill

Lynch Japan Securities as of, the date of the report (except as otherwise

stated in the analysis). The credit, financial and stock markets have been

experiencing unusual volatility and Merrill Lynch Japan Securities expresses

no opinion or view as to any potential effects of such volatility on the

Company, the Tender Offeror or the Transactions. It should be understood

that subsequent developments may affect the Merrill Lynch Japan Securities

41

Stock Valuation Report, and Merrill Lynch Japan Securities does not have

any obligation to update, revise, or reaffirm such report.

As noted above, the descriptions of the analyses conducted by Merrill Lynch

Japan Securities set forth above are summaries of the material financial

analyses presented by Merrill Lynch Japan Securities to the board of

directors of the Company in connection with the above-mentioned Merrill

Lynch Japan Securities Stock Valuation Report and are not comprehensive

descriptions of all analyses undertaken by Merrill Lynch Japan Securities in

connection with such report. The preparation of the Merrill Lynch Japan

Securities Stock Valuation Report and its underlying analysis is a complex

analytical process involving various judgments about the most appropriate

and relevant methods of financial analysis and the application of those

methods to the particular circumstances; therefore, it is not necessarily

advisable to describe only a part of the results or summary of the analysis.

Merrill Lynch Japan Securities believes that its analyses must be considered

holistically. Merrill Lynch Japan Securities further believes that selecting

portions of its analyses and the factors considered or focusing on any

information presented in tabular format, without considering all analyses and

factors or the narrative description of the analyses, could create a misleading

or incomplete view of the processes underlying Merrill Lynch Japan

Securities’ analysis and the opinion. The fact that any specific analysis has

been referred to in the summary set out above is not meant to indicate that

such analysis was given greater weight than any other analysis referred to in

such summary

In performing its analyses, Merrill Lynch Japan Securities considered

industry performance, general business and economic conditions, and other

matters, many of which are beyond the control of the Tender Offeror and the

Company. The estimates of the future performance of the Company based

on which Merrill Lynch Japan Securities’ analyses were made are not

necessarily indicative of actual values or actual future results, which may be

significantly more or less favorable than such estimates. Merrill Lynch

Japan Securities’ analyses were performed solely as part of its analysis

contained in the Merrill Lynch Japan Securities Stock Valuation Report and

were provided to the board of directors of the Company in connection with

the delivery of such report. Merrill Lynch Japan Securities’ analyses do not

purport to be appraisals or to reflect the prices at which a company might

actually be sold or the prices at which any securities have been traded or may

be traded at any time in the future. Accordingly, the estimates used in, and

the ranges of valuations resulting from, any particular analysis described

above are inherently subject to substantial uncertainty and should not be

taken to be Merrill Lynch Japan Securities’ view of the actual value of the

Company.

The Tender Offer Price was determined through negotiations between the

Tender Offeror and the Company (or the special committee), rather than by

any financial advisor, and was approved by the board of directors of the

Company. The determination to express its opinion to support the Tender

Offer was made solely by the board of directors of the Company. As

described above, the Merrill Lynch Japan Securities Stock Valuation Report

was only one of many factors considered by the board of directors of the

Company in its evaluation of the Transactions and should not be viewed as

determinative of the views of the board of directors or the management of

42

the Company with respect to the Transactions or the Tender Offer Price.

Merrill Lynch Japan Securities has not made or been provided with any

independent evaluation or appraisal of the assets or liabilities (contingent or

otherwise) of the Company or any other entity, nor has it made any physical

inspection of the properties or assets of the Company or any other entity.

Merrill Lynch Japan Securities has not evaluated the solvency or fair value

of the Company or any other entity under any state, federal or other laws or

regulations relating to bankruptcy, insolvency or similar matters.

Merrill Lynch Japan Securities has acted as financial advisor to the Company

in connection with the Transactions and will receive a fee for its services,

substantial portion of which is contingent upon consummation of the

Transactions. In addition, the Company has agreed to reimburse expenses

incurred in connection with, and indemnify Merrill Lynch Japan Securities

against, certain liabilities arising out of the engagement.

Merrill Lynch Japan Securities and its affiliates comprise a full service

securities firm and commercial bank engaged in securities, commodities and

derivatives trading, foreign exchange and other brokerage activities, and

principal investing as well as providing investment, corporate and private

banking, asset and investment management, financing and financial advisory

services and other commercial services and products to a wide range of

companies, governments and individuals. In the ordinary course of its

businesses, Merrill Lynch Japan Securities and its affiliates may invest on a

principal basis or on behalf of customers or manage funds that invest, make

or hold long or short positions, finance positions or trade or otherwise effect

transactions in equity, debt or other securities or financial instruments

(including derivatives, bank loans or other obligations) of the Tender Offeror,

the Company and certain of their respective affiliates.

Merrill Lynch Japan Securities and its affiliates in the past (including as of

the date of the Merrill Lynch Japan Securities Stock Valuation Report) have

provided, and may provide after such date, investment banking, commercial

banking and other financial services to the Company and its affiliates and

have received or after such date may receive compensation for the rendering

of such services. In addition, Merrill Lynch Japan Securities and its

affiliates in the past (including as of the date of the Merrill Lynch Japan

Securities Stock Valuation Report) have provided and may provide after

such date, investment banking, commercial banking and other financial

services to the Tender Offeror and its affiliates and have received or after

such date may receive compensation for the rendering of these services.

Merrill Lynch Japan Securities does not provide any legal, accounting or tax-

related advice.

f. Structure of the Independent System for Deliberation at the Company

The Company internally established a system for deliberations, negotiations, and

decisions on the Transactions from a position independent of the Tender Offeror.

Specifically, immediately after the Company received an initial proposal from

ITOCHU on February 17, 2020 about commencing deliberations about the Company

going private, in the process of negotiations between the Company and ITOCHU on

the transaction terms of the Transactions including the Tender Offer Price and the

43

process of preparing a business plan that is to be the basis for the valuation of the

Company Shares, from the perspective of eliminating the issue of structural conflicts

of interest, it has been decided that, apart from the involvement of Director Mikio

Nishiwaki, who used to work at ITOCHU, and several people seconded from

ITOCHU who were necessary in the process of preparing the business plan, not only

are officers and employees of the Company who currently concurrently serve as

officers and employees of companies of the ITOCHU Group not involved in that

process, but officers and employees of the Company who were officers and

employees of companies in the ITOCHU Group in the past are also not involved. It

has also been decided that even people seconded from ITOCHU who were involved

in the formulation of the business plan are not to be involved in the process of

negotiations on the transaction terms of the Transactions, and that treatment is

continuing. Specifically, at the time of deliberations on the Transactions, in addition to

Director Toshio Kato, Director Naomichi Tsukamoto, and Director Jun Takahashi,

who are independent from the ITOCHU Group, Director Mikio Nishiwaki, who

transferred from the ITOCHU Group more than two years ago, is involved as a

director in charge of negotiations. The approval of the special committee has been

obtained with respect to the fact that there is no problem from the perspective of

independence with the system for deliberation of the Transactions built internally in

the Company, including that treatment (including the scope and duties of the officers

and employees of the Company involved in deliberations, negotiations, and decisions

on the Transactions).

Further, of the directors of the Company, Director Mikio Nishiwaki worked at

ITOCHU from the time he joined ITOCHU in 1982 until 2018, but given that

Director Mikio Nishiwaki is currently in the position of General Manager of the

Finance & Accounting Division of the Company, he is familiar with quantitative

deliberations at the Company, and he is essential for the formulation of the Company’s

business plan and the calculation of the Company’s corporate value based on that

business plan, Director Mikio Nishiwaki is participating in deliberations on the

Transactions including attending meetings of the special committee on the condition

that full attention is given in checks of the directors in charge of negotiating and in

monitoring by the special committee so that the role of Director Mikio Nishiwaki in

the negotiations with ITOCHU will be limited as much as possible in a form in which

he is involved only in formulating the business plan necessary for negotiations instead

of direct negotiations with ITOCHU in light of the fact that the independent special

committee was established and measures are being taken to secure fairness.

g. Approval of all Directors who do not have an Interest in the Company and Opinion

by all Corporate Auditors who do not have an Interest that there is no Objection

The board of directors of the Company carefully discussed and deliberated on whether

the Transactions including the Tender Offer will contribute to the improvement of the

corporate value of the Company and whether the transaction terms pertaining to the

Transactions including the Tender Offer Price are appropriate (i) based on (a) legal

advice received from Mori Hamada & Matsumoto, (b) advice from a financial

perspective from Merrill Lynch Japan Securities and the contents of the Merrill Lynch

Japan Securities Stock Valuation Report, and (c) the contents of the PwC Stock

Valuation Report submitted to the Company through the special committee and (ii)

while giving maximum respect to the decisions of the special committee indicated in

the Report.

Consequently, the Company judged that (i) the Transactions including the Tender

Offer will contribute to the corporate value of the Company but (ii) although the

44

Tender Offer Price of 2,300 yen has a certain level of reasonableness from the

perspective of providing the general shareholders of the Company an opportunity to

earn a return on their investments and it cannot be recognized that the Tender Offer

Price lacks validity, the Tender Offer Price is not at a level where the Company can

actively recommend that its general shareholders should tender their shares in the

Tender Offer.

Of the 12 directors of the Company, Director Koji Takayanagi, Director Isao Kubo,

and Director Mikio Nishiwaki used to work at ITOCHU, and even though more than

20 years have passed since Director Takashi Sawada worked at ITOCHU, he was in

the position of an employee of ITOCHU in the past, so from the perspective of

eliminating as much as possible the likelihood that the Transactions will be affected

by the issue of structural conflicts of interest, the above resolutions were passed at the

above meeting of the board of directors held today with the unanimous approval of

the directors after deliberations among the eight directors excluding Director Koji

Takayanagi, Director Isao Kubo, Director Mikio Nishiwaki, and Director Takashi

Sawada.

Further, all of the corporate auditors who attended the above board of directors

meeting (of the four corporate auditors, three corporate auditors attended that meeting

(two of those corporate auditors are outside corporate auditors)) expressed an opinion

that they have no objection to the above resolutions.

Further, from the perspective of eliminating as much as possible the likelihood that the

Transactions will be affected by the issue of structural conflicts of interest, Director

Koji Takayanagi, Director Isao Kubo, Director Mikio Nishiwaki, and Director Takashi

Sawada are not participating in deliberations and resolutions at the board of directors

meetings of the Company on the Transactions including the above board of directors

meeting held today, and Director Koji Takayanagi, Director Isao Kubo, and Director

Takashi Sawada are not participating in deliberations on the Transactions in the

position of the Company or discussions and negotiations with ITOCHU on the

Transactions. Further, as explained “f. Structure of the Independent System for

Deliberation at the Company” above, Director Mikio Nishiwaki worked at ITOCHU

from the time he joined ITOCHU in 1982 until the time he joined the Company in

2018, but given that Director Mikio Nishiwaki is currently in the position of General

Manager of the Finance & Accounting Division of the Company, he is familiar with

quantitative deliberations at the Company, and he is essential for the formulation of

the Company’s business plan and the calculation of the Company’s corporate value

based on that business plan, Director Mikio Nishiwaki is participating in deliberations

on the Transactions on the condition that full attention is given in checks of the

directors in charge of negotiating and in monitoring by the special committee so that

the role of Director Mikio Nishiwaki in the negotiations with ITOCHU will be limited

as much as possible in a form in which he is involved only in formulating the business

plan necessary for negotiations instead of direct negotiations with ITOCHU in light of

the fact that the independent special committee was established and measures are

being taken to secure fairness.

Further, Kunihiro Nakade, who is a corporate auditor of the Company, used to work at

ITOCHU, so he has not participated whatsoever in the above deliberations of the

board of directors and he has refrained from stating an opinion on the above

resolutions of the board of directors.

h. Procedures after receiving a document regarding a request for the convocation of

an extraordinary shareholders meeting

45

After the Company received a document regarding a request for the convocation of an

extraordinary shareholders meeting from ITOCHU, it carefully discussed and

deliberated on the contents of the opinion expressed with respect to the Share

Consolidation in light of legal advice received from Mori Hamada & Matsumoto.

Further, the Company gave a report to the special committee on the contents of that

request and the contents of the opinion expressed by the board of directors of the

Company regarding the Share Consolidation, and as stated in the contents of the

report set out in “a. Establishment of an independent special committee at the

company” above, the Company obtained an opinion from the special committee that

given that it is believed it would not be disadvantageous to the minority shareholders

of the Company for the board of directors of the Company to make a decision on

making the Company private through the Share Consolidation after the successful

completion of the Tender Offer on the assumption that will be done following the

methods expected in the Transactions, considering the results of the Tender Offer and

the contents of the request from ITOCHU for the convocation of an extraordinary

shareholders meeting, it is believed that it would not be disadvantageous to the

minority shareholders of the Company for the board of directors of the Company (i) to

convene an extraordinary shareholders meeting, in response to that request, whose

agenda items include a share consolidation etc., as the shareholder’s proposals and (ii)

to express that the Company endorses making the Company private through the Share

Consolidation but takes a neutral position regarding whether to approve the Proposals

and leave that to the discretion of the shareholders as the opinion of the board of

directors of the Company on the shareholder’s proposals based on the fact that the

Tender Offer in the Transaction was successfully completed. Following that, all of the

directors of the Company that participated in deliberations and resolutions at the

meeting of the board of directors of the Company held on September 10, 2020

approved that the Company would endorse making the Company private through the

Share Consolidation in light of the fact that the Tender Offer in the Transaction was

successfully completed, but the Company would take a neutral position regarding

whether to approve the Proposals and left that to the discretion of the shareholders.

Further, of the 12 directors of the Company, Director Koji Takayanagi, Director Isao

Kubo, and Director Mikio Nishiwaki used to work at ITOCHU, and even though

more than 20 years have passed since Director Takashi Sawada worked at ITOCHU,

he was in the position of an employee of ITOCHU in the past, so from the perspective

of eliminating as much as possible the likelihood that the Transactions will be affected

by the issue of structural conflicts of interest, the above resolutions were passed at the

meeting of the board of directors held on September 10, 2020 with the unanimous

approval of the directors after deliberations among the eight directors excluding

Director Koji Takayanagi, Director Isao Kubo, Director Mikio Nishiwaki, and

Director Takashi Sawada.

Further, all of the corporate auditors who attended the above board of directors

meeting (of the four corporate auditors, three corporate auditors attended that meeting

(two of those corporate auditors are outside corporate auditors)) expressed an opinion

that they have no objection to the above resolutions.

(4) Opinion of the Board of Directors of the Company on the Proposals

The board of directors of the Company has announced that it endorses making the Company

private through the Share Consolidation in light of the fact that the Tender Offer in the

Transaction was successfully completed but the board of directors of the Company takes a

neutral position regarding whether to approve the Proposals and leaves that to the discretion

46

of the shareholders.

The board of directors of the Company has believed that its corporate value will improve in

the medium- and long-term by making the Company private through the Transaction;

however, even though the Tender Offer Price of 2,300 yen per share has a certain

reasonableness from the perspective of providing the general shareholders of the Company

an opportunity to earn a return on their investments, and it cannot be recognized that the

Tender Offer Price lacks validity, the board of directors of the Company reached a

conclusion that the Tender Offer Price is not at a level where it can actively recommend that

its general shareholders should tender their shares in the Tender Offer. Therefore, the

Company made a decision that it is appropriate to take a neutral position regarding whether

to recommend that the shareholders tender their shares in the Tender Offer and to ultimately

leave that decision to the shareholders, and the Company expressed an opinion approving

the Tender Offer and passed a resolution to leave the decision of whether to tender shares in

the Tender Offer to the judgment of the shareholders at the meeting of the board of directors

of the Company held on July 8, 2020.

As stated in “g. Method of processing fractional shares and amount of money expected to be

delivered to the shareholders as a result of that processing” in in “(b) Details of the Share

Consolidation” in “(2) Overview of the Share Consolidation” above, it is expected that as a

result of the Share Consolidation, the number of Company Shares held by the shareholders

other than ITOCHU will become fractional shares, and the Company Shares equivalent to

the total number of those fractional shares will be sold to ITOCHU or the Tender Offeror by

the Company at the request of ITOCHU, and money with a value that is obtained by

multiplying 2,300 yen per share, which is the same as the Tender Offer Price, by the number

of Company Shares held by each shareholder of the Company other than ITOCHU is to be

delivered to each of those shareholders.

Given that it is believed the corporate value of the Company will improve by making the

Company private through the Share Consolidation after the completion of the Tender Offer

in the Transaction, that the amount of money per share of the Company Shares before the

Share Consolidation to be delivered to the shareholders of the Company other than

ITOCHU upon the Share Consolidation is expected to be 2,300 yen, which is the same

amount as the Tender Offer Price, that amount has a certain reasonableness from the

perspective of providing the general shareholders of the Company an opportunity to earn a

return on their investments, and it cannot be recognized as an amount that lacks validity, and

that it is believed it is necessary to take the Company private through the Share

Consolidation as soon as possible to ensure the general shareholders of the Company are not

put in an unstable position based on the current situation where the Tender Offer has been

successfully completed, the board of directors of the Company decided that it is appropriate

to endorse making the Company private through the Share Consolidation, but it decided to

take a neutral position regarding whether to approve the Proposals and left that to the

discretion of the shareholders because it is expected the amount of money per share of the

Company Shares before the Share Consolidation to be delivered to the shareholders of the

Company other than ITOCHU upon the Share Consolidation will be 2,300 yen, which is the

same amount as the Tender Offer Price, which was not at a level where the Company can

actively recommend the tendering of shares in the Tender Offer.

Further, as stated in “h. Procedures after receiving a document regarding a request for the

convocation of an extraordinary shareholders meeting” in “(c) Measures to Ensure the

Fairness of the Transaction and Measures to Avoid Conflicts of Interest” in “(3) Grounds of

the Amount of Money Expected to be Delivered to the Shareholders Upon the Processing of

Fractions in Connection With the Share Consolidation” above, after receiving a written

request for the convocation of an extraordinary shareholders meeting from ITOCHU, the

47

board of directors of the Company made a report to the special committee and, after the

approval of the special committee was obtained, all of the directors of the Company that

participated in deliberations and resolutions at the meeting of the board of directors of the

Company held on September 10, 2020 approved the expression of that opinion.

(5) Future Prospects

As stated in “(b) Likelihood of Delisting” in “(3) Grounds of the Amount of Money

Expected to be Delivered to the Shareholders Upon the Processing of Fractions in

Connection With the Share Consolidation” above, it is expected the Company Shares will be

delisted in association with the implementation of the Share Consolidation.

(6) Details of Transactions, Etc. with Controlling Shareholders

a. Transactions, etc. with controlling shareholders and status of conformity with policy on

measures to protect minority shareholders

Since ITOCHU is the controlling shareholder (the parent company) of the Company,

expressing an opinion regarding the Tender Offer constitutes a transaction, etc. with a

controlling shareholder. As a “Policy on Measures to Protect Minority Shareholders in

Conducting Transactions with Controlling Shareholder” in the Corporate Governance

Report disclosed on May 29, 2020, the Company stated that in regard to transactions

between the Company and the controlling shareholder, the Company negotiates and

decides transaction conditions and other factors in the same manner as it would with

standard transactions in order to maintain its independence as a listed company and

prevent conflicts of interest with minority shareholders.

Transactions, including the Tender Offer, the Company has implemented measures to

address structural conflict of interest issues and information asymmetry issues and to

ensure the fairness of the terms and conditions of the Transactions, including the Tender

Offer Price, as stated in “(c) Measures to Ensure the Fairness of the Transaction and

Measures to Avoid Conflicts of Interest” in “(3) Grounds of the Amount of Money

Expected to be Delivered to the Shareholders Upon the Processing of Fractions in

Connection With the Share Consolidation” above. The Company believes these measures

are consistent with the policy stated above.

b. Measures to ensure the fairness of the transaction and measures to avoid conflicts of

interest

Please see “(c) Measures to Ensure the Fairness of the Transaction and Measures to

Avoid Conflicts of Interest” in “(3) Grounds of the Amount of Money Expected to be

Delivered to the Shareholders Upon the Processing of Fractions in Connection With the

Share Consolidation” above.

c. Overview of the opinions obtained from those without interest in the controlling

shareholder on the fact that the transaction is not disadvantageous to the minority

shareholders

On July 7, 2020, the Company obtained from the special committee the Report, which

stated that the special committee believed it would not be disadvantageous to the

minority shareholders of the Company for the board of directors of the Company to (a)

make a decision on the Transaction including the Tender Offer, which was a decision to

endorse the Tender Offer and to express an opinion that the decision on whether to tender

shares in the Tender Offer should be left to the shareholders of the Company and (b)

make a decision on making the Company private through the Share Consolidation after

48

the successful completion of the Tender Offer on the assumption that would be done

following the methods expected in the Transactions.

For details, please see “a. Establishment of an independent special committee in the

Company” in “(c) Measures to Ensure the Fairness of the Transaction and Measures to

Avoid Conflicts of Interest” in “(3) Grounds of the Amount of Money Expected to be

Delivered to the Shareholders Upon the Processing of Fractions in Connection With the

Share Consolidation” above.

4. Abolishment of Provisions on Share Unit Numbers

(1) Reasons for Abolishment

The provisions on share unit numbers are to be abolished because the total number of issued

shares of the Company after the effectuation of the Share Consolidation will be two shares

and it will no longer be necessary to provide for share unit numbers.

(2) Scheduled Date of Abolishment

November 16, 2020 (scheduled)

(3) Conditions for Abolishment

The abolishment is subject to the approval of the proposal on the Share Consolidation and

the proposal on the partial amendment to the articles of incorporation regarding the

abolishment of provisions on share unit numbers at the Extraordinary Shareholders Meeting

as initially proposed and the effectuation of the Share Consolidation.

5. Partial Amendment to the Articles of Incorporation

(1) Purpose and Grounds for the Amendment to the Articles of Incorporation

If the proposal on the Share Consolidation is approved and passed at the Extraordinary

Shareholders Meeting as initially proposed and the Share Consolidation is effectuated, the

total number of authorized shares of the Company Shares will be reduced to two shares in

accordance with Article 182, paragraph 2 of the Companies Act. In order to clarify that point,

Article 6 (Total Number of Authorized Shares) of the articles of incorporation is to be

amended subject to the effectuation of the Share Consolidation.

If the Share Consolidation is effectuated, the total number of issued shares of the Company

will be two shares, and it will no longer be necessary to provide for share unit numbers.

Accordingly, subject to the effectuation of the Share Consolidation, in order to abolish the

provisions on share unit numbers of the Company Shares, which currently provide that 100

shares constitute 1 unit, the provisions of Article 7 (Share Unit Numbers) and Article 8

(Additional Buying of Shares Not Constituting One Unit) are to be entirely deleted and the

article numbers are to be moved forward as a result of that amendment.

(2) Details of the Amendment to the Articles of Incorporation

The details of the amendment to the articles of incorporation are as follows.

(Underlined parts are amended)

Current Proposed Amendment

49

Current Proposed Amendment

Article 6 Total Number of Authorized Shares

The total number of authorized shares of the

Company is 1 billion shares.

Article 6 Total Number of Authorized Shares

The total number of authorized shares of the

Company is two shares.

Article 7 Share Unit Numbers

The share unit number of the Company is 100

shares.

(Deleted)

Article 8 Additional Buying of Shares Not

Constituting One Unit

A shareholder of the Company may request

that the Company sell to it the number of

shares which, together with the shares less than

one unit owned by that shareholder, will

constitute the share unit number of the

Company; provided, however, that if the

Company does not hold the number of shares

equivalent to the number to be sold upon such

a request, that request will not take effect.

(Deleted)

Article 9 – Article 37 (Provisions omitted) Article 7 – Article 35 (as currently provided)

(3) Schedule of the Amendment to the Articles of Incorporation

November 16, 2020 (scheduled)

(4) Conditions for the Amendment to the Articles of Incorporation

The amendment to the articles of incorporation is subject to the approval of the proposal on

the Share Consolidation and the proposal on the partial amendment to the articles of

incorporation regarding the abolishment of provisions on share unit numbers at the

Extraordinary Shareholders Meeting as initially proposed and the effectuation of the Share

Consolidation.

-End-